Oil prices remained steady ahead of President-elect Donald Trump’s inauguration, as markets prepared for potential uncertainty in his second term. Brent crude traded below $81 a barrel, following a slight decline over the past two sessions, while West Texas Intermediate hovered around $78. Trump is expected to sign numerous executive orders on his first day in office, including measures related to energy, trade tariffs on China, Canada, and Mexico, and potential sanctions on Iran.
Crude prices had seen a rally at the beginning of the year, driven by cold weather in the Northern Hemisphere that increased heating demand, coupled with U.S. sanctions on Russia’s oil industry. These sanctions have led Asian buyers to seek alternative oil supplies, contributing to the increase in prices. Trading volumes were expected to be lighter on Monday due to the U.S. federal holiday.
The additional sanctions on Russia have disrupted tanker markets and pushed up prices for Middle Eastern crude, creating a bullish backwardation structure for Brent. Speculators have been increasing long positions in Brent crude, although some short positions have also been established.
Scott Bessent, Trump’s nominee for Treasury Secretary, indicated last week that he supports intensifying measures against Russia’s oil industry, which could lead to further disruptions. Meanwhile, Trump’s pick for national security adviser has previously advocated for “maximum pressure” on Iran, suggesting that energy sanctions could become even more stringent.
Vishnu Varathan of Mizuho Bank noted that while the tightening of oil supplies from Russia and Iran could drive prices higher, the increase in U.S. production could help balance the market and act as a stabilizing force for oil prices.
In geopolitical developments, a ceasefire in Gaza has taken effect, temporarily halting hostilities. The truce, mediated by Qatar and Egypt and supported by the U.S., outlines an initial six-week period in which 33 hostages held by Hamas will be released in exchange for hundreds of Palestinians imprisoned by Israel.
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