Oil prices steadied as investors weighed President-elect Donald Trump’s threats of tariffs on Canada, Mexico, and China alongside developments in the Middle East. Brent crude remained above $73 per barrel, while West Texas Intermediate (WTI) hovered around $69, recovering from earlier losses. Trump’s tariff announcements on his Truth Social platform triggered a surge in the U.S. dollar, which, in turn, pressured commodities priced in the currency.
On Monday, oil prices dropped sharply by 2.9%, marking their largest decline in nearly a month, after Israel indicated it was close to a cease-fire agreement with Hezbollah. This development raised hopes that a potential truce could reduce the geopolitical risks to Middle Eastern oil supplies and shipping routes. However, it remains uncertain whether Hezbollah, an Iran-backed group, will agree to the truce.
Chris Weston, head of research at Pepperstone Group Ltd., cautioned that while a deal between Israel and Iran appeared promising, there was still a chance it could fall apart. “If the cease-fire fails, we could see a swift reversal of short positions,” Weston said. He also noted that Trump’s comments may simply be part of pre-negotiation rhetoric before he names a U.S. trade representative.
Robert Lighthizer, a key figure behind Trump’s tariff strategy, has yet to be appointed to a role in the upcoming administration’s second term.
Oil prices have been largely range-bound since mid-October, as traders balance geopolitical risks, particularly related to Russia and Iran, with expectations of an oversupply in the coming year. Ahead of OPEC+’s upcoming meeting this weekend, Iran’s representative within the cartel suggested that the group had limited capacity to adjust production cuts due to increased supply from other regions.
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