Oil Steadies Near Yearly Low Amid Geopolitical Jitters and Trade War Fears
Oil prices fluctuated near their lowest point this year as geopolitical uncertainties and the threat of energy tariffs cast a shadow over the outlook.
Trump's Policies and Trade War Concerns
President Donald Trump's geopolitical positions and threats to impose tariffs on energy imports have weighed on oil prices. China's retaliatory tariffs on the US, which are scheduled to take effect on Monday, have sparked concerns about a trade war that could impact global growth. Additionally, Trump's proposal to take control of Gaza has drawn widespread condemnation.
Market Withdrawals and Supply Concerns
Since Trump's inauguration, investors have withdrawn from crude and fuel markets, contributing to lower prices. However, supply concerns persist over potential restrictions from Iran and Russia, as well as delayed sanctions on crude imports from Canada and Mexico.
Strengthening Middle Eastern Grades and US Stockpile Growth
Some Middle Eastern oil grades have exhibited strength, with Saudi Arabia raising the price of its flagship variety to Asia by the highest margin in over two years. In the US, commercial crude stockpiles increased significantly in the past week, partly due to increased imports from Canada ahead of the imposition of import levies. Stockpile levels typically rise at this time of year, but they remain below seasonal averages.
Softening Physical Market
Meanwhile, the physical market appears to be showing signs of weakness. The spread between the two closest Brent contracts has narrowed to near its lowest point this year, indicating a reduced backwardation structure. For WTI, options bets suggest a potential shift into a bearish contango pattern next year.