Oil Heads for Fourth Weekly Gain as Market Braces for Trump
Oil is heading for a fourth straight weekly gain as President-elect Donald Trump heads into a second term, with traders seeking clarity on broad sanctions and trade policies.
Brent crude is nearing $82 a barrel, up more than 2% this week, while West Texas Intermediate is nearing $79. Trump’s advisers are crafting a broad sanctions strategy to try to facilitate a Russia-Ukraine diplomatic agreement while also putting pressure on Iran and Venezuela, according to people familiar with the matter. New trade tariffs could also disrupt global flows.
“I don’t think they’re going to rush to sanctions” when Trump takes office, Ed Morse, senior adviser at Hartree Partners LP, said on Bloomberg Television. There may be a slew of new executive orders, but “tariffs and sanctions will be on the back burner,” he said.
A week ago, the Biden administration unveiled its toughest-ever curbs on Russian oil. The fallout from that move is still reverberating in global crude markets, with shipping costs skyrocketing and longtime buyers of Russian oil including China and India looking elsewhere for supplies.
Crude has risen sharply since the year began, as cold weather in the Northern Hemisphere winter boosted heating demand, U.S. crude inventories fell to seasonal lows and sanctions threatened to curb supplies. Trump, who will be inaugurated on Monday, has vowed to impose tariffs on Canada, including on its oil. While Canada has resisted, the leader of its largest oil-producing province has resisted the effort.
The physical market has also strengthened. The gap between Brent’s two nearest contracts, known as the prompt spread, has widened in a sign of tighter conditions. The gap is at $1.41 a barrel in backwardation, more than $1 higher than the previous month. In the Middle East, grades including Murban and Oman have surged relative to the benchmark.
Source: Bloomberg
