Oil Prices Rise as Dollar Weakens and Trade Tensions Simmer
The global oil market is on high alert as prices edged higher on Wednesday, driven by a weakening US dollar and growing uncertainty surrounding President Donald Trump’s proposed tariffs. As traders closely watch US inventories and the potential impact of the national energy emergency declared by Trump, Brent crude futures rose 43 cents to $79.72 per barrel, while US West Texas Intermediate crude futures climbed 45 cents to $76.28.
Dollar Weakness Boosts Oil Prices
A marginally weaker US dollar is providing support to oil prices, according to UBS analyst Giovanni Staunovo. The dollar struggled to regain ground against major currencies, hovering close to two-week lows. This weakness is typically beneficial for oil prices, as it makes commodities denominated in dollars more attractive to holders of other currencies.
Trade Tensions and Sanctions in Focus
The oil market is shifting its attention away from US sanctions against Russia and towards Trump’s potential trade policy, says ING analysts. The threat of tariffs is putting pressure on the energy complex, with Trump vowing duties on European imports and discussing a 10% tariff on goods imported from China. The impact of these tariffs on global trade and oil demand remains uncertain, causing market participants to exercise caution.
US Energy Policy and Production
Trump’s sweeping plan to maximize domestic oil and gas production, including declaring a national energy emergency, is unlikely to spur near-term energy investment or change US production growth, according to Morgan Stanley analysts. However, it could moderate potential erosion of refined product demand. The US president’s policy is also expected to have a limited impact on global oil supplies, as the country’s production growth is already slowing.
Weather Disruptions and Production Cuts
A rare winter storm churning across the US Gulf Coast and extreme cold weather in North Dakota are disrupting oil production. North Dakota’s oil production is estimated to be down by between 130,000 and 160,000 barrels per day due to operational challenges, according to the state’s pipeline authority. These disruptions are adding to the uncertainty in the oil market, as traders navigate the complex web of geopolitical and economic factors affecting prices.
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