Oil Prices Set for Weekly Decline Amid Trade War Concerns and OPEC Pressure
Oil is poised for its first weekly drop of the year as concerns over potential trade wars and US President Donald Trump's request for lower oil prices weigh on market sentiment.
Brent crude trades near $78 per barrel, down over 3% this week, while West Texas Intermediate (WTI) hovers above $74. Trump's first week in office has been marked by tariff threats against Canada, Mexico, and China, accompanied by his vow to seek OPEC's cooperation in reducing oil prices.
On Thursday, Trump indicated a preference for avoiding tariffs with China. However, the president also expressed a willingness to engage with North Korean leader Kim Jong Un.
These developments have contributed to a decline in oil futures prices, with the weekly loss on track to be the largest since November. Nevertheless, prices remain higher year-to-date, supported by increased heating demand due to a cold Northern Hemisphere winter and US sanctions on Russia.
Trump has threatened additional penalties against Russia if President Vladimir Putin does not reach an agreement to end the conflict in Ukraine. The US sanctions, imposed during the Biden administration, have restricted the flow of Russian oil and raised global crude prices. Some Asian refiners have reduced crude processing rates or are considering cuts in response.
"Convincing OPEC to increase output will be a challenge," said Warren Patterson, head of commodities strategy at ING Groep NV. "Lower oil prices would also hinder a significant increase in US production."
Trump has declared a national energy emergency to promote domestic production. He has repeatedly urged OPEC+ to lower prices when he deemed them excessively high during his first term.
According to the Energy Information Administration (EIA), US crude inventories declined for the ninth consecutive week. Stocks are below the five-year seasonal average and contradict an earlier industry report that estimated an increase.