In Asian markets on Thursday, oil prices showed minimal movement despite a notable price hike from Saudi Arabia’s state oil company for its March deliveries. This minor change follows a significant drop in Brent prices the previous day, marking the largest decline in nearly three months.
Brent crude futures saw a slight increase, up 8 cents to $74.69 a barrel by 0422 GMT, with U.S. West Texas Intermediate crude climbing 15 cents to $71.18 a barrel. The previous day’s trading witnessed a more than 2% drop in oil prices due to a substantial build in U.S. crude and gasoline inventories, indicating reduced demand. These figures caused investors to reassess their positions considering the new U.S.-China trade tariffs, which affect energy products among others.
The broader market context includes a 10% plunge in prices from the highs observed on January 15, closely preceding Donald Trump’s inauguration as U.S. President. Analysts forecast that market volatility will persist, driven in part by Trump’s policy decisions, particularly concerning tariffs. “We can expect significant volatility in pricing over the coming weeks and months as markets scramble to weigh the impact of Trump’s new policy positions, not least regarding tariff measures,” analysts from BMI noted on Thursday.
In response to the trading fluctuations, Saudi Aramco, the leading exporter globally, increased prices for its Asian customers. This decision appears to have curbed the aggressive sell-off seen on Wednesday. Market analyst Tony Sycamore from IG highlighted,”After the overnight sell-off and the Saudi news, there is likely to be some buying from traders covering shorts ahead of a strong band of support in the $70/68 region.”
The U.S. has recently intensified sanctions against Russia, focusing on ‘shadow vessels’ used to bypass trade blockades. While these actions aim to exert pressure on Russia, Trump’s tariffs on China have not reached the severity of his campaign rhetoric. Although China retaliated by imposing duties on U.S. oil, LNG, and coal, the impact has been limited due to modest levels of U.S. exports to China. “While some tariff measures could put upward pressure on oil prices, the net impact will likely be bearish, given their potentially adverse effects on the global economy and Trump’s proven willingness to offer carve-outs for energy (to limit impacts to supply),” BMI commented.
As the global oil market navigates through the complexities of international trade policies and fluctuating demand, prices are expected to remain unpredictable. The influence of geopolitical strategies, particularly those involving major oil-producing nations and consumer markets, continues to be a significant factor in determining future pricing trends.
