Trump stated that Interior Secretary Doug Burgum will work with Energy Secretary Chris Wright to increase oil production and lower prices. The USA government will extract more of this liquid Gold than ever before. This caused oil prices to plummet during trading. Afterwards, the Trump administration pushed for stricter sanctions on Iran, causing oil prices to quickly rebound, although the duration was not long.
On Thursday, driven by the news of Saudi Aramco significantly raising oil prices for Asia, oil prices rose more than 1% during the day. Reports indicate that Saudi Arabia will raise the price of its flagship Arab Light oil sold to Asia in March by $2.40 per barrel, the largest single price increase since August 2022. At that time, the selling price will be $3.90 per barrel above the benchmark price.
After the US stock market opened on Thursday morning Eastern Time, President Trump stated that Interior Secretary Doug Burgum will work with Energy Secretary Chris Wright to increase oil production and lower prices. The USA government will extract more of this liquid Gold than ever before. "We will lower oil prices, and everything else will follow."
Although Trump's remarks did not present any new viewpoints, they still exert pressure on oil prices. WTI Crude Oil Futures quickly retraced the gains made during the day, falling from $71.76 per barrel to $70.69, currently down 0.2% for the day; Brent Crude Oil Futures fell from around $75.27 to $74.26, down more than 0.3% for the day.
Afterwards, the Trump administration pushed for stricter sanctions on Iran, causing oil prices to quickly rebound, although the duration was not long.
Trump's push for stricter sanctions on Iran continues from his earlier statements this week. According to CCTV News, on February 4 local time, President Trump signed a directive aimed at restoring the "maximum pressure" policy against Iran. Trump stated that Iran is "too close" to obtaining nuclear weapons, and the USA has the right to prevent Iran from selling oil to other countries.
Trump disturbs oil prices.
Less than a month into Trump's presidency, he has already disturbed the oil market multiple times:
Last week, Trump publicly urged OPEC+ twice to lower oil prices. However, OPEC+ remains cautious and did not make any adjustments to the current oil production plan during the review meeting on Monday.
Over the weekend, Trump announced tariffs on Canada and Mexico, leading to a surge in oil prices, with Brent crude futures briefly exceeding $77 per barrel on Monday.
Due to the USA's announcement on Monday to delay tariffs on Canada and Mexico, oil prices retraced some of the earlier gains made on the same day.
On Tuesday, US oil fell by 3% during the session, dropping below the year-end level for the first time in 2024. Subsequently, US officials stated that Iranian oil exports could be reduced to zero, causing oil prices to rebound significantly from the daily low.
Since Trump took office, investors have been withdrawing from the crude oil and fuel markets, leading to a decline in oil prices. Current markets are showing signs of supply loosening. The premium for Brent crude spot contracts relative to next month’s contracts has shrunk to one of the lowest levels this year, falling below 50 cents per barrel, while at the end of last month, the premium was about $1. This phenomenon indicates a decrease in demand in the spot market and some alleviation of supply pressures.
However, the market remains concerned about the potential for the USA to impose harsher sanctions on Iran and Russia, as well as the possible imposition of tariffs on crude oil from Canada and Mexico; these factors could further restrict supply.
Some market participants believe that stricter sanctions on Iran could more quickly and directly impact supply, as in recent years, the USA has relaxed enforcement, leading to an increase in Iranian crude oil exports by about 1 million barrels per day.
In contrast, there are doubts about whether the energy policy reforms proposed by Trump can incentivize US oil producers to increase output. US oil companies have increasingly focused on capital discipline and shareholder returns in recent years and may not abandon their current production strategy due to policy adjustments.
Executive Vanloh of Quantum Capital Group predicts that the USA is unlikely to witness a new wave of fossil energy production increase, pointing out that compared to 2017, private equity mergers and acquisitions in the Shale Oil and Shale Gas sectors have dropped by 84%, and the center of the dominant Energy market has returned from USA Shale Oil to OPEC.
According to a report by Wood Mackenzie, Trump's proposed tariffs on Canada and Mexico will lead to changes in North America's Crude Oil Product flow, with Mexico's exports expected to shift towards Europe and Asia markets in response to the 25% tariff, while Canada's Crude Oil Product flow to the USA is expected to continue as tariffs on Energy are reduced to 10%. The report predicts that Trump's tariffs will reduce US oil demand by 0.05 million barrels per day by 2026.
Citigroup Analyst Francesco Martoccia and others hold a Bearish view on oil prices, stating, "We still firmly believe that Trump might eventually become a Bearish factor for the oil market. Trump has always viewed lowering Energy prices as a central solution to address US inflation, interest rates, debt, and living cost issues, which was also one of the major topics during his election."
Editor/lambor
