Oil prices head for first weekly decline amid Trump’s trade war threats and OPEC pressure

Oil prices were set to record their first weekly drop of the year, triggered by President Donald Trump’s aggressive rhetoric on trade wars and his intent to press Saudi Arabia and OPEC to reduce oil prices during his initial days in the White House.

Brent crude slid below $78 per barrel, marking a more than 3% weekly decline, while West Texas Intermediate (WTI) hovered near $74 per barrel. This marks the sharpest weekly loss for crude since November.

Trump’s bold moves

Trump’s presidency began with threats of imposing tariffs on major trading partners, including Canada, Mexico, and China. He further pledged to push oil-producing nations to lower prices, adding volatility to already nervous markets.

These developments set the stage for futures contracts to suffer their steepest weekly losses in months, despite an overall rise in oil prices this year. The uptick earlier in the year was driven by surging heating fuel demand during a severe winter in the Northern Hemisphere and the repercussions of U.S. sanctions against Russia.

Geopolitical tensions and sanctions

Trump threatened new sanctions against Moscow unless Russian President Vladimir Putin reaches an agreement to end the prolonged conflict in Ukraine. Recent sanctions by the U.S. under the Biden administration’s final days had already curtailed Russian oil flows, boosting demand and prices for Middle Eastern crude. The resulting price surge led some Asian refineries to cut crude processing rates or contemplate further reductions.

Last week, Russian seaborne oil exports witnessed their most significant drop since November, impacted by the sanctions imposed by President Joe Biden in his final days in office.

“It won’t be easy to convince OPEC to increase production,” Warren Patterson, Head of Commodities Strategy at ING Groep NV in Singapore told Bloomberg. “Additionally, declining oil prices present a significant hurdle for any substantial rise in U.S. oil production.”

Among Trump’s executive orders this week was a declaration of a national energy emergency to bolster domestic oil output. During his first term, he frequently pressured the OPEC+ alliance to cut prices whenever he deemed them excessively high.

U.S. oil stocks fall further

U.S. crude inventories dropped for the ninth consecutive week, according to a Thursday report by the Energy Information Administration (EIA). Current stock levels remain below the five-year seasonal average, contradicting earlier industry reports that had projected an inventory increase.

As the global oil market navigates the ripple effects of Trump’s trade threats and policy shifts, uncertainty looms over production strategies and price stability in the months ahead.