Oil Near Lowest Level of Year as Trump Weighs on Sentiment
Oil steadied near its lowest level of the year as U.S. President Donald Trump’s geopolitical position and the threat of tariffs on energy weighed on the outlook. Brent crude traded below $75 after falling 2.1% on Wednesday to wipe out all of this year’s gains, while West Texas Intermediate neared $71. China is set to impose retaliatory tariffs on the U.S. starting Monday, sparking a trade war that could hurt global growth, while the American leader’s proposal to take over Gaza has been widely condemned.
Investors have pulled out of crude and fuel markets since Trump’s inauguration, sending prices tumbling, although concerns remain over further curbs on supplies from Iran and Russia, as well as over pending sanctions on crude from Canada and Mexico. Some Middle Eastern oil grades gained as a result, with Saudi Arabia raising prices of its flagship variety to Asia by the most in more than two years. In the U.S., national commercial crude inventories rose by the most in almost a year, thanks in part to higher imports from Canada before the initial levies took effect.
Levels typically start to build around this time of year, though they remain below seasonal averages.
“The ongoing trade dispute between the U.S. and China continues to inject uncertainty into global oil markets,” said Priyanka Sachdeva, senior market analyst for brokerage Phillip Nova Pte in Singapore. Meanwhile, rising U.S. inventories may “indicate potential oversupply in the domestic market, which could put downward pressure on prices.” There are signs that the physical market is weakening. The spread between Brent’s two nearest contracts has narrowed to near its narrowest this year, with the bullish backwardation structure narrowing to 52 cents a barrel, compared with about $1 at the end of last month. For WTI, options bets are being placed on the curve to flip into a bearish contango pattern next year.
Source: Bloomberg
