Oil Prices Dip Amid Strengthening Dollar and Resumed Pipeline Flows
As the holiday season approaches, oil prices have taken a slight hit, driven by a strengthening dollar and the resumption of flows through Russia’s Druzhba pipeline. Thin Trading Volumes Weigh on Market
In a quiet pre-holiday trading session, West Texas Intermediate (WTI) crude slid 0.3% to settle near $69 a barrel, while Brent crude settled below $73. Despite paring losses after the close, both benchmarks were trading little changed.
Pipeline Flows Resume, Easing Supply Concerns
Belarus and Hungary are once again receiving crude via the key Druzhba pipeline, following a brief halt last week due to an unspecified incident. This development has helped alleviate supply concerns, contributing to the dip in oil prices.
Dollar Strengthens, Commodities Lose Appeal
The US government’s avoidance of a shutdown has boosted the dollar, making commodities less attractive to investors. This has tempered the appeal of oil, which is often priced in dollars.
Trump’s Criticism of Panama Canal Fees Sparks Controversy
President-elect Donald Trump has criticized the Panama Canal, claiming it charges “exorbitant” fees. Panama’s president has rebuffed these claims, but the controversy has added to the uncertainty surrounding global oil trade.
Tariff Threats and Supply Concerns Weigh on Market
Trump’s threats to impose tariffs on various countries, including Canada, Mexico, and China, have created uncertainty in the market. Additionally, expectations of ample supply and lackluster demand in China have limited oil price gains.
Market Focus Shifts to Fundamentals
Despite the noise surrounding Trump’s comments, the market is largely focused on supply-and-demand fundamentals shaping the outlook for 2025. “The market is largely dismissing the Panama Canal headlines as rhetoric for now,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Hedge Funds Show Growing Optimism
Hedge funds, however, have shown signs of growing more bullish, with their net-long position on WTI crude rising by the most in over a year in the week to Dec. 17. This shift in sentiment comes after prices rallied on the prospect of sanctions reducing supplies of Russian and Iranian oil.
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