Oil prices set for fourth weekly gain with Trump's second term

Oil prices are on track for their fourth consecutive weekly increase, fueled by trader anticipation around sanctions on Russia and trade policy shifts as president-elect donald trump prepares for his second term in office.

Brent crude climbed to about $82 per barrel, marking a 2% weekly gain, while west texas intermediate (WTI) approached $79 per barrel. The market remains focused on the evolving geopolitical landscape and potential disruptions to global oil flows.

Trump’s strategic sanctions plan

Advisors to trump are reportedly devising a comprehensive sanctions strategy aimed at brokering a diplomatic resolution between russia and ukraine. Simultaneously, the plan is expected to exert additional pressure on iran and venezuela. Insiders suggest that new trade tariffs could also impact global crude supply chains.

Ed morse, senior advisor at hartree partners, commented on bloomberg tv, “I don’t think they will rush into imposing sanctions once trump assumes office. While several new executive orders are likely, tariffs and sanctions will probably take a back seat initially.”

Just a week ago, president joe biden’s administration implemented its toughest sanctions yet on russian oil. These measures are still reverberating through global markets, driving up shipping costs and forcing major russian oil buyers, including china and india, to seek alternative sources.

Crude prices have surged in 2024, bolstered by colder-than-average weather across the northern hemisphere, which has intensified demand for heating fuels. Meanwhile, u.s. crude inventories have dropped to their lowest seasonal levels, adding to the upward price momentum.

Trump, who will take office on monday, has also pledged to impose tariffs on canadian imports, including oil. This has set the stage for potential retaliation from canada, with alberta’s premier—the leader of canada’s largest oil-producing province—firmly opposing such measures.

The physical oil market has shown clear signs of tightening. The prompt spread for brent crude—the gap between the nearest two contracts—has widened to $1.39 per barrel, up significantly from just over $1 a month ago. In the middle east, key crude grades like murban and oman have also seen their prices rise above benchmark levels, further underscoring the tightening supply conditions.

With geopolitical tensions, sanctions, and supply constraints dominating headlines, the global oil market is entering a period of heightened volatility. As trump’s administration begins to take shape, the energy sector will be closely watching for policy announcements that could redefine the future of global oil dynamics.