Oil Prices Short 3% Ahead of Feb.3 OPEC+ Meeting
Oil prices fell short by about 3% in the global commodity market ahead of the Organisation of Petroleum Exporting Countries and Allies (OPEC+) meeting on Monday. Due to bearish sentiment, oil saw a weekly decline as US President Donald Trump’s tariff threats, coupled with the Federal Reserve’s (Fed) decision to keep the interest rate unchanged,.
The International benchmark Brent crude traded at $75.42 per barrel down by around 2.7% relative to the closing price of $77.54 a barrel last week. West Texas Intermediate (WTI), the American benchmark, traded at $72.15 a barrel at the same time on Friday, a decline of about 3% from last Friday’s session, which closed at $74.38 per barrel.
Oil prices have generally declined throughout the week following President Trump’s announcement on late Sunday of a directive imposing a 25% tariff on all goods entering the US from Colombia, adding that this rate would increase to 50% within a week.
Trump also maintained his tariff threats against key trade partners, including Mexico, Canada, China, and the EU, raising concerns over global trade tensions despite not presenting a specific plan for tariff policy.
These sanctions have raised concerns about significantly higher prices for US consumers and cost pressures on import-dependent firms, thereby exerting downward pressure on oil prices.
Meanwhile, Trump’s remarks on Saudi Arabia and OPEC must reduce oil prices affected the price decline. ‘I will also ask Saudi Arabia and OPEC to reduce the cost of oil. It needs to come down, I was surprised it wasn’t reduced before the election.
“If prices had fallen, the war would have ended immediately. Now the price is high enough to sustain the war,’ he said during the 55th Annual Meeting of the World Economic Forum (WEF).
On Wednesday, the Fed’s announcement to keep the interest rates unchanged pulled the prices down, while Fed Chair Jerome Powell’s statements that there was no need to rush to adjust the policy stance further contributed to price falls.
The Fed kept its policy rate unchanged at 4.25-4.5%, in line with expectations. While the Fed’s decision to leave interest rates unchanged at its first monetary policy meeting of the year was expected by market players, the decision indicated a slowdown in economic activity in the world’s largest oil-consuming country, leading to a decline in oil prices.
Furthermore, data from the US Energy Information Administration (EIA) showing that oil stocks in the US increased also pressured the prices. According to the EIA’s weekly oil report, US commercial crude oil stocks rose to 415.1 million barrels last week, an increase of about 3.5 million barrels compared to the previous week.
Expectations were that stocks would increase by about 2.86 million barrels. The increase, exceeding market predictions, indicated a decline in demand within the country and supported the downward movement of the prices.
The OPEC+ meeting scheduled for February 3 is closely monitored by market players, recently the US oil sanctions against Russia caused more than 1 million barrels of oil to be withdrawn from global supply. While this situation increases supply shortage concerns, it might restrict the fall of the prices.
In addition, the data from the Commerce Department showing that the US economy expanded by 2.3% in the fourth quarter of 2024, alleviating market player’s concerns about oil demand might also limit further price declines.
The US economy expanded by 2.3% in the fourth quarter of 2024, falling short of market expectations of 2.7%, according to the Commerce Department’s first advance reading released Thursday.
For the full year, the economy grew by 2.8%, a slight cooling from the 2.9% expansion in 2023 but still reflective of steady momentum. This alleviated market players’ concerns about oil demand and had an upward impact on prices.
Moreover, the number of Americans filing first-time unemployment claims decreased by 16,000 last week to 207,000, according to the US Labor Department data released on Thursday.
The figure was much lower than the market forecast of 224,000 and down from the previous week’s unrevised level of 223,000. The data strengthened expectations for an increase in demand and supported upward price movements. Oil Prices Fall, European Gas Ticks Up Amidst U.S Tariff Threats
