Oil prices dipped slightly but remained on track for a weekly gain as markets weighed the potential impact of a second Trump presidency, which could influence both global supply and demand dynamics. Brent crude traded around $75 per barrel, gaining nearly 3% for the week, while West Texas Intermediate hovered near $72. The focus remains on China, the world’s largest oil importer, as it is set to announce its largest fiscal stimulus package since the COVID-19 pandemic, potentially in response to a protracted trade standoff with the U.S.
A Trump presidency could bring mixed outcomes for the oil market. While increased U.S. production could drive prices down, possible trade tensions and tariffs could weigh on the Chinese economy and curb demand, Citigroup analysts noted. Standard Chartered added that even with Trump advocating for expanded domestic drilling, U.S. producers may not comply. The president-elect is also likely to reinforce sanctions on Iranian oil exports, potentially tightening global supply.
“Markets will be watching for indications of how much U.S. oil supply might increase under Trump,” said Yeap Jun Rong, a market strategist at IG Asia Pte. “Potential tariffs on China also add uncertainty.”
The crude market has seen downward pressure since April, largely due to softening demand from China and increased supply from non-OPEC+ producers. However, potential escalation in Middle East tensions is contributing to a sense of caution in the market. While analysts expect a possible oversupply in 2025, the situation remains fluid. Russell Hardy, CEO of Vitol Group, highlighted at a recent conference in Singapore that uncertainties around exports from Iran, Venezuela, and the Middle East under a new U.S. administration could tighten the market balance.
“There’s still a lot we don’t know regarding the Middle East, Iranian exports, and Venezuelan output under a Trump administration,” Hardy stated. “It’s premature to conclude that oversupply is certain by 2025.”
Meanwhile, the Federal Reserve’s widely anticipated decision to cut interest rates by a quarter-point on Thursday has raised questions about future policy direction. Economists predict that the central bank may face challenges in easing further due to inflationary pressures tied to Trump’s policies, including potential tax cuts and additional tariffs.
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