Oil retreated from a five-month high as the market adjusts to new sanctions on Russian crude and digested mixed signals from President-elect Donald Trump on his intent to uphold the measures.
West Texas Intermediate slid 1.7% to settle below $79 a barrel after hitting the highest since July on Wednesday. Saudi Aramco has received inquiries from Indian and Chinese buyers for as much as 750,000 barrels a day of extra crude to make up for any shortfalls caused by the Russian sanctions. Meanwhile, the amount of oil stranded off the Chinese coast has swelled as traders and shippers try to avoid being caught in the curbs.
Traders are parsing mixed signals on how the incoming Trump administration will approach Russian sanctions. Scott Bessent, Trump’s Treasury secretary nominee, said he would be “100% on board” with dialing up sanctions on Russian oil majors. Earlier, Trump’s advisers were reported to be crafting a strategy that could benefit Russian oil producers and help end the war with Ukraine.
Market participants are also using the four-day stretch ahead of Trump’s inauguration to shuffle positions in preparation for potential tariffs on Canadian oil and moves to encourage domestic production.
“Crude may take a pause to consolidate its recent gains as the market looks ahead to Monday,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. Biden’s last-minute sanctions “have shifted the landscape for Trump’s first day in office, potentially requiring adjustments to his strategy.”
Futures also may be experiencing a corrective phase after spending days in overbought territory on the relative strength index.
Still, West Texas Intermediate has rallied about 10% to start the year as cold weather bolsters demand for heating fuels and threatens North American output. In the US, inventories fell for the eighth straight week to hit the lowest since April 2022.
Crude’s gain on Wednesday came even as Israel and Hamas agreed to a ceasefire deal, bringing a temporary halt to the war in the Gaza Strip that has gone on for 15 months and touched off broader turmoil in the Middle East. The ceasefire will start on Sunday and last six weeks, Qatari and US officials said.
