Oil prices are poised for a weekly decline following US President Donald Trump’s new energy policies, which include increasing fossil fuel production and lifting offshore drilling bans, alongside the recent ceasefire agreement between Israel and Hamas.
The International benchmark Brent crude traded at $77.97 per barrel at 3.28 p.m. local time (1228 GMT) on Friday, down by around 2.4% relative to the closing price of $79.87 a barrel last week.
West Texas Intermediate (WTI), the American benchmark, traded at $74.89 a barrel at the same time on Friday, a decline of about 3% from last Friday’s session, which closed at $77.24 per barrel.
Oil prices have generally declined throughout the week following President Trump’s declaration of a ‘national energy emergency’ early in his second term, signaling 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 Organization of the Petroleum Exporting Countries (OPEC). The OPEC+ group, which includes OPEC countries led by Saudi Arabia and non-OPEC producers led by Russia, is currently implementing supply cuts totaling 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.
By Basak Erkalan and Duygu Alhan
