Oil prices experienced a decline on Tuesday, primarily influenced by a strengthening U.S. dollar following President-elect Donald Trump’s threats to impose tariffs on Canada, Mexico, and China. The global benchmark Brent crude fell below $73 per barrel after a significant 2.9% drop on Monday, marking its largest decline in nearly a month. Meanwhile, West Texas Intermediate (WTI) crude traded close to $69 per barrel.
Trump’s tariff announcements have raised concerns about potential disruptions in energy flows from Canada to the United States, contributing to the downward pressure on commodities priced in dollars. The combination of geopolitical tensions and economic policy announcements has created a volatile environment for oil traders.
On Monday, oil prices were also affected by news that Israel might be nearing a deal with Hezbollah, which could significantly reduce risks to crude supply from the Middle East. However, uncertainty remains regarding whether the Iran-backed group will accept a ceasefire. Chris Weston, head of research at Pepperstone Group Ltd., noted that while the signs appear positive, any agreement between Israel and Iran could still falter, leading to rapid reversals of short positions in the market.
Weston suggested that Trump’s comments might be more about posturing than actual policy changes, especially as he prepares to nominate a new U.S. trade representative. The former U.S. Trade Representative Robert Lighthizer, known for his role in shaping Trump’s tariff strategy, has yet to secure a position in the upcoming administration.
Since mid-October, oil prices have been trading within a narrow range as traders balance geopolitical risks—particularly concerning supply from Russia and Iran—against expectations of an oversupply in the coming year. As OPEC+ ministers prepare for their meeting this weekend, Iran’s representative indicated that the organization has limited capacity to reverse output cuts due to increased supplies from other sources.
In addition to these factors, Russia’s seaborne crude exports have seen their most significant drop since July, with shipments declining to a two-month low as flows to key buyer India fell sharply. The four-week average volumes dropped by approximately 150,000 barrels per day as of November 24, reflecting ongoing challenges in maintaining export levels amid geopolitical tensions and sanctions.
The overall reduction in Russian exports comes ahead of critical discussions among OPEC+ oil ministers about production strategies. Russia had pledged deeper output cuts in October and November to compensate for previous overproduction; however, recent data indicates that its output is aligning closely with OPEC+ targets.
In the context of rising geopolitical tensions and economic uncertainties, market participants are closely monitoring developments that could impact oil supply dynamics. The potential for sanctions against Iran’s oil exports under the incoming Trump administration adds another layer of complexity to an already volatile market.
Despite these challenges, demand for crude oil remains robust in Asia, particularly in China and India. China’s crude imports have shown signs of recovery as lower prices incentivize stockpiling, while Indian refiners increased their crude throughput by 3% in October to meet fuel export demands.
As traders await U.S. personal consumption expenditures (PCE) data set for release this Wednesday—an indicator likely to influence Federal Reserve policy—market sentiment remains cautious amid fluctuating geopolitical dynamics and economic signals.
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