Oil prices drop as Trump vows to raise US oil output

Oil prices continued to decline on Thursday and WTI price dropped from $71.9 to $71.1 per barrel. If oil prices retreat, they may encounter support near $71.0 per barrel, while resistance may be found near $76.0 per barrel.

Oil prices were under pressure on Wednesday by an unexpectedly large US crude oil stock build. US crude oil inventories released on Wednesday showed that US crude stockpiles exceeded expectations. The US Energy Information Administration reported a weekly crude stockpile build of 8.7M barrels for the week to January 31st, against expectations of a more modest build of 2.4M barrels and following a rise of 3.5M barrels the week before.

Oil prices are under pressure by concerns over US President Donald Trump’s energy agenda. Trump has vowed to declare a national energy emergency and start drilling for oil immediately to build up US strategic reserves. On Thursday, Trump reiterated that he plans to boost US oil production to bring oil prices down. Trump’s comments had the desired effect and oil prices dropped on Thursday. 

Speaking at the World Economic Forum in Davos, in January, Trump urged OPEC members to lower oil prices. Trump said that he would ask Saudi Arabia and other OPEC countries to bring down the cost of oil.

Trump has already issued a series of executive orders imposing tariffs on trading countries. Trump posted tariff threats on his social media on Thursday and again on Friday, causing market turmoil. Trump has threatened BRICS countries with massive tariffs of up to 100% if they try to replace the dollar with any other currency or if they create a new currency for international trade. On Saturday, Trump announced that he would impose 25% tariffs on Canadian and Mexican goods, except Canadian energy exports, which will be subject to a 10% tariff. 

On Monday, Trump posted a new list of threats and grievances on his social media concerning Canada, China, and several other countries. Later on Monday, however, Trump took back some of his tariff threats, demonstrating that they are used to intimidate other countries into submission. Trump stated that he would postpone imposing tariffs on Canada and Mexico for a month, still holding the tariffs as a threat against them. Oil prices retreated after Trump withdrew the tariffs against Canada.

On Tuesday, Trump stated that he is determined to impose a 10% duty on imports from China to the US. China, however, is retaliating in kind, imposing tariffs on US imports to China. The Chinese finance ministry said that it would impose tariffs on energy products, including levies of 15% on coal and Natural Gas and 10% on crude oil.

OPEC+ has announced that it will extend its voluntary production cuts until the end of the first quarter of 2025, however. Oil prices have been under pressure and the cartel is limiting production in an attempt to raise oil prices. 

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve held interest rates steady at its January meeting, which was concluded on Wednesday, after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%, which was in line with expectations. 

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting, putting pressure on oil prices. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration. Market odds of another rate cut before summer dropped after Powell’s speech, with markets pricing in a rate cut in June at the earliest.

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Written by:
Myrsini Giannouli

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