Oil Prices Decline over U.S Energy Emergency Policies
Oil prices ended the week in a bearish position amidst uncertainties and negative impacts of U.S. energy policies in the global commodities market. Analysts noted that US President Donald Trump’s new energy policies, which include increasing fossil fuel production and lifting offshore drilling bans, would affect price movement.
Also, the Middle East ceasefire agreement between Israel and Hamas calmed down supply-side risks Brent crude traded at $77.97 per barrel on Friday, while West Texas Intermediate (WTI), the American benchmark, traded at $74.89 a barrel.
Oil prices have generally declined throughout the week following President Trump’s declaration of a ‘national energy emergency’ early in his second term, signalling significant shifts in US energy policy.
A White House executive order highlighted concerns that deficiencies in US energy production represent an ‘extraordinary threat’ to economic and national security, prompting plans to ramp up fossil fuel output.
Trump also signed an order to tap into Alaska’s natural resources and reversed offshore oil and gas drilling bans that were imposed during the Biden administration.
US oil production, which reached record levels of 13 million barrels per day (bpd) on average last year, is expected to help offset the decline in output from the Organisation of the Petroleum Exporting Countries (OPEC).
The oil group, which includes OPEC countries led by Saudi Arabia and non-OPEC producers led by Russia, is currently implementing supply cuts totalling around 5.85 million bpd, including voluntary reductions.
Experts predict that increased US output could contribute to short-term supply growth, thus supporting downward price movements.
Meanwhile, Trump’s proposed 25% tariff on all goods from Mexico and Canada, alongside an additional 10% tariff on Chinese imports, raised concerns about potential economic fallout and reduced oil demand. These factors might put additional downward pressure on oil prices.
Furthermore, analysts expect Trump to target oil prices within the $70-$80 per barrel range to align with his energy policy goals, adding to the prevailing downward price trend.
Moreover, the recent ceasefire agreement between Israel and Hamas, which came into effect on January 19, has also alleviated geopolitical risks, reducing fears of potential disruptions to global oil supplies and contributing to ongoing price pressures.
The ceasefire suspended Israel’s military actions in Gaza, which have resulted in over 47,000 Palestinian casualties since October 7, 2023. The agreement, which includes a prisoner exchange and efforts towards a permanent truce, has brought a degree of stability to the region.
However, the latest data from the US Energy Information Administration (EIA) showed strong domestic demand, limiting further price declines.
On January 19, the EIA reported an 0.2% decrease in US crude stocks during the week ending January 17, falling by approximately 1 million barrels to 411.7 million barrels. This was lower than the market expectation, which had predicted a 1 million barrel increase.
In addition, US sanctions on Russian oil production and exports continue to provide price support by raising concerns over supply.
On January 10, the US Department of the Treasury announced new sanctions targeting Russia’s energy revenues. Key Russian oil companies, such as Gazprom Neft and Surgutneftegas, which together account for about 20% of Russia’s oil exports, were added to the sanctions list, further tightening global supply. #Oil Prices Decline over U.S Energy Emergency Policies FG to Construct 10,000 Housing Units for Medical Workers Nationwide
