Oil prices have remained within a narrow range on Monday, as optimism regarding tighter supplies—resulting from stricter U.S. sanctions against Russia—was balanced by caution surrounding President-elect Donald Trump’s impending inauguration.
Crude oil prices stabilized after achieving four consecutive weeks of significant gains, as traders anticipated tighter global supplies following the U.S. government’s announcement of its most stringent sanctions to date against Russia’s energy sector. However, the upward momentum in oil prices was tempered by a reduction in tensions in the Middle East. Over the weekend, Hamas and Israel engaged in the exchange of hostages and prisoners under a newly established ceasefire, which led traders to apply a smaller risk premium to oil.
Brent oil futures set to expire in March increased by 0.2 percent to $80.91 per barrel, while West Texas Intermediate crude futures also rose by 0.2 percent to $77.56 per barrel as of 20:21 ET (01:21 GMT).
Vijay Valecha, chief investment officer at Century Financial, remarked that oil prices remained stable ahead of President-elect Donald Trump’s inauguration, as the market prepared for a period of potential uncertainty and upheaval during his second term. The incoming president has indicated he may impose significant tariffs on trade partners such as China, Canada, and Mexico, and could also introduce sanctions against Iran. Crude oil prices have surged at the start of the year, driven by cold weather in the Northern Hemisphere increasing heating demand, alongside broader U.S. sanctions impacting Russia’s oil sector, which have left Asian customers seeking alternative sources. It is anticipated that trading volumes for Monday’s session may be lower due to a federal holiday in the U.S.
Trump inauguration in focus for tariffs and energy cues
Market attention has shifted squarely toward Trump’s inauguration later today, with the President-elect having pledged to implement increased trade tariffs on China, the leading oil importer. Trump also reiterated his intentions to boost U.S. energy production during a rally on Sunday, promising to ease regulations affecting the domestic energy industry.
The anticipated rise in U.S. production, which is already nearing record levels of over 13 million barrels per day in 2024, could potentially mitigate the effects of the recent sanctions against Russia by sustaining global crude supplies. Furthermore, Trump has committed to implementing expansionary policies throughout his presidency—a trend that may bolster demand in the world’s largest oil consumer. Recent months have shown mixed signals regarding U.S. oil demand. While colder weather has driven up the need for heating fuels, it has simultaneously disrupted travel across many regions during the busy year-end holiday season.
Valecha also pointed out that the new sanctions on Russia have disrupted tanker markets, causing a spike in Middle Eastern crude prices and widening Brent’s prompt spread in a bullish backwardation pattern. Speculators have increased their long positions on Brent, although there has been a smaller accumulation of short positions.
She further noted that Scott Bessent, Trump’s nominee for Treasury Secretary, mentioned last week that he would back intensified measures targeting Russia’s oil industry, likely resulting in further disruptions. The President-elect’s choice for national security adviser has previously promised “maximum pressure” on Iran.
“If Bessent gets his way, energy sanctions will only tighten,” stated Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “However, the broader perspective is that the U.S. is determined to strengthen its position as a leading energy exporter,” Valecha added.
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Oil markets assess demand and supply outlook
Traders are weighing a somewhat ambiguous outlook regarding oil supply and demand. While the latest U.S. sanctions on Russia may restrict global supplies, this could be counterbalanced by softening demand, particularly if Trump enforces steep trade tariffs on China.
As the world’s largest oil importer, China has experienced a consistent decline in its demand for crude amid ongoing economic challenges. On Monday, the People’s Bank of China maintained its benchmark loan prime rate, as broadly anticipated. Nonetheless, Beijing is expected to escalate its stimulus efforts in response to the trade challenges presented by Trump. Recent data indicate that China’s economy has shown improvement following the implementation of its most aggressive stimulus measures in late 2024.
