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Crude steady at 3-week lows in holiday-thinned trading early Tue - Jan. 28, 2025
Crude in cautious retreat but Trump can't talk it down - Jan. 24, 2025
Crude has backed off the five-month highs notched on January 15 in the aftermath of the US’ aggressive new oil sanctions against Russia. From its perch above $82, Brent futures had climbed down to $78-79/barrel as we closed our weekly report.
The 11th-hour move by the previous Joe Biden administration took the market by surprise and has caused a major disruption in the crude procurement plans of refiners in China and India, the main buyers of Russian crude. But prompt alternatives to Russian barrels have become available, even if at a price, and the market appears to have calmed down from peak fear of supply shortage.
Crude, however, went up an elevator following the sanctions and is coming down the stairs, and still retains at least $3-4/barrel premium. We don’t expect a big downward correction as long as the shadow of the Russian sanctions continues to hang over the market.
Meanwhile, it was Trump’s first week in the Oval Office and he came out all guns blazing. He even pushed headlines from the World Economic Forum off the front pages – until he addressed the Davos attendees virtually on Thursday.
Trump signed nearly 100 executive orders after his inauguration on Monday, about half a dozen of which were related to the energy sector. Then there was his social media salvo at President Vladimir Putin, threatening and beseeching him at the same time to do a deal quickly on Ukraine, his promise to push Saudi Arabia and OPEC to open the spigots, and a thinly-veiled demand of the US Federal Reserve to drop interest rates immediately.
It was like drinking from a fire hose. The world is taking Trump 2.0 seriously but most political and business leaders alike are at a total loss as to what to make of his rhetoric and how to assess the likelihood of him carrying through his bold promises and brash threats.
But don’t worry – we will be working even harder to cut through all the noise and extract the signal for our readers.
Jan 2025: Mildly bullish near-term, mildly bearish end-Jan/early Feb - Jan. 10, 2025
After weighing the factors supporting and weighing on crude, we conclude:
US' tough new Russia oil sanctions may have a short shelf life - Jan. 12, 2025
The Biden administration took oil market players by surprise on Friday by announcing the most expansive sanctions yet against Russia’s oil sector.
We suspect it was not only the oil market; the US’ European Union allies across the pond may have also been caught unawares – we couldn’t find a single reaction from any of the region’s leaders! The UK, for what it is worth, joined the US, simultaneously announcing sanctions against Gazpromneft and Surgutneftegas,
It was curious to see Biden fire the bazooka just 10 days before handing over charge to Donald Trump, who is clearly going to have a vastly different approach to resolving the Ukraine war.
What does the upcoming change of guard in the US say for the durability of the latest round of sanctions and crude’s 4% spike on Friday? Our succinct insights in this report.
OIL IN 2025: Softer crude prices but not because of oversupply - Dec. 27, 2024
Benchmark Brent crude prices averaged just under $80/barrel in 2024, about 2.7% lower versus last year.
We expect the average to dip into the $70-75/barrel band in 2025, but not because of a sizeable oversupply in the market, let alone a “glut”.
A sombre economic outlook for 2025, bolstered by China’s uphill battle to jump-start growth and amplified by expectations of a fresh round of trade wars under Trump 2.0, has shaped a bearish narrative around oil demand.
But we would caution against leaning too much into the gloom-and-doom scenario.
Crude is more likely to come under pressure from an evaporating geopolitical risk premium and worries over economic stability than any severe economic downturns or recessions.
Oil demand could remain relatively resilient, helped by softer prices, leading to a largely balanced market, especially with OPEC+ remaining extra cautious and conservative in bringing back the barrels it has locked away.
What challenges our baseline views? We also bring you the contrarian perspective and wildcards!
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