Oil headed for the first weekly decline this year after Donald Trump raised the prospect of trade wars and said he will ask Saudi Arabia and OPEC to lower prices in his first few days as the new US president. Brent (BZ=F, BZT=F) traded near $78 a barrel and is down around 3% this week, while West Texas Intermediate (CL=F) was below $75. Trump’s first week in the White House began with tariff threats on Canada, Mexico and China, followed by a pledge that he would ask the producer group to “bring down the cost of oil.”
On Thursday night, Trump said he’d prefer not to have to impose tariffs on China. The dollar fell following the remarks during an interview on Fox News, which helped to pare crude’s earlier losses.
Futures are on track for the biggest weekly loss since November, though prices are still higher this year after a cold Northern Hemisphere winter drove up heating demand and US sanctions on Russia upended crude markets. Trump has threatened more penalties on Moscow if President Vladimir Putin doesn’t “make a deal” to end the prolonged war in Ukraine. The broad US sanctions that were implemented in the final days of the Biden administration tightened the flow of Russian oil and increased prices of other physical barrels from the Middle East. That’s led to some Asian refiners lowering crude processing rates or considering cuts.
“It will be no easy task to convince OPEC to increase output,” said Warren Patterson, the head of commodities strategy for ING Groep NV in Singapore. “Furthermore, lower oil prices would also be an obstacle to significantly increasing US oil production.”
One of Trump’s executive orders this week was to declare a national energy emergency to help boost domestic production. In his first term, the president repeatedly called on OPEC+ to lower prices when he felt they were too high.
US crude stockpiles, meanwhile, declined for a ninth week, according to a report on Thursday from the Energy Information Administration. Inventories are lower than the five-year seasonal average for this time of the year, and went against an earlier industry report which estimated a build.
