Oil prices steady as markets await Trump’s policies

Oil prices remained steady on Wednesday and WTI price hovered near $77.0 per barrel. If oil prices retreat, they may encounter support near $74.2 per barrel, while resistance may be found near $81.0 per barrel.

Donald Trump’s Presidential inauguration at the US capitol attracted market attention on Monday. Trump was sworn in as the 47th president of the United States. 

Oil prices are under pressure by concerns over 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 Tuesday, Trump issued a series of executive orders imposing tariffs on trading countries. Those tariffs have the potential to affect oil supply in the US, causing volatility in oil prices. Trump imposed a 25% tariff on imports from Canada starting February 1. Canada’s primary export is crude oil, which is chiefly bought by the US. 

Increasing Western sanctions against Russia and Iran have been paying off, limiting the oil output of these countries. Outgoing US President Joe Biden has imposed strict sanctions on Russian oil exports. Incoming US President Donald Trump, however, may ease restrictions on Russia’s oil exports in exchange for an agreement to end the war in Ukraine. Trump, on the other hand, is also expected to reinforce restrictions on Iran's oil exports. 

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. 

Concerns of a broadening conflict in the Middle East have been boosting oil prices in the past year. Reports that Israel and Hamas have reached a ceasefire agreement put pressure on oil prices last week. A ceasefire deal in the Gaza area will likely halt Houthi militia’s attacks on ships in the Red Sea. The attacks have been raising supply concerns for some time now, boosting oil prices, but concerns over a break in the oil supply chain receded after the announcement of the deal, putting pressure on oil prices.

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%.  In his press conference after the policy meeting, Fed Chair Jerome Powell delivered a hawkish message, emphasizing the need to be cautious about further rate cuts.

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Written by:
Myrsini Giannouli

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