Oil prices edge lower amid dollar strength and Russian pipeline resumption

Oil prices dipped slightly in pre-holiday trading, pressured by a strengthening U.S. dollar and the resumption of flows through Russia’s Druzhba pipeline.

West Texas Intermediate (WTI) crude fell 0.3%, settling near $69 per barrel, while Brent crude remained just below $73. Both benchmarks recovered some losses after the session close, trading with minimal changes.

Crude deliveries via the Druzhba pipeline resumed after a brief halt last week caused by an unspecified incident. Belarus and Hungary are among the nations benefiting from the restored supply.

Trump's criticism of Panama Canal sparks controversy

In the Americas, President-elect Donald Trump took aim at Panama, claiming the Panama Canal — handling around 2% of global oil trade — imposes "excessive fees." Panamanian President José Raúl Molino swiftly dismissed the claims, asserting the canal’s sovereignty and independence.

The U.S. dollar strengthened after the government avoided a shutdown, reducing the appeal of dollar-denominated commodities like oil.

Oil market remains range-bound amid uncertainty

Trump’s criticism of Panama came alongside threats to impose tariffs on Canada, Mexico, China, and the EU unless they increase purchases of U.S. oil and natural gas. Despite the heightened uncertainty, crude prices remained locked in a narrow range since mid-October, held back by weak Chinese demand and expectations of oversupply.

Rebecca Babin, Senior Energy Trader at CIBC Private Wealth Group, told Bloomberg, "The market is largely dismissing Panama Canal-related news as political noise, shifting its focus to supply and demand fundamentals for 2025."

Hedge funds show renewed optimism

Hedge funds appear to be betting on higher prices, with net long positions on WTI crude rising by the largest margin in over a year during the week ending December 17, according to U.S. Commodity Futures Trading Commission data. This optimism follows potential sanctions targeting Russian and Iranian oil supplies, which could significantly tighten global markets.

As 2025 approaches, the oil market faces a delicate balance between geopolitical tensions and supply-demand dynamics, leaving investors watching closely for any shifts.