By Oil prices experienced a decline on Monday, after US President Donald Trump’s public call for OPEC to lower prices.
This statement from Trump followed the announcement of extensive measures to increase US oil and gas production.
These policy announcements were made during the President’s first week in office, signaling an early focus on energy policy.
Trump’s call for the Organization of the Petroleum Exporting Countries and allies to reduce prices suggests a desire to maintain affordable energy costs for American consumers and businesses while expanding domestic energy production.
This dual approach could shift the dynamics of the global oil market, with implications for producers and consumers.
“Recent calls for increased production and potential trade measures have contributed to market volatility, with analysts warning of a possible downside if geopolitical risks escalate,” Arslan Ali, analyst at FXempire, said.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $74.61 per barrel, down 0.1%. Brent crude oil on the Intercontinental Exchange was also down 0.1% at $77.44 a barrel.
OPEC set to increase output from April
OPEC and allies are likely to unwind some of their voluntary oil production cuts from April, and increase output.
The cartel had extended the planned increase in output several times last year, with the latest extension coming in December when it reached an agreement to delay the plan till the end of March.
Trump’s call for OPEC to cut prices had hit oil prices last week. Brent and WTI both had climbed above $80 per barrel, before reversing gains to fall sharply over the last couple of sessions.
If OPEC goes through with its plan in April, supply will increase in the oil market. This will be in line with Trump’s desire as increased supply may weigh on global prices.
Trump last week called on the Gulf nations to lower oil prices, which could in turn reduce Russia’s revenues from oil exports, and stop the war in Ukraine.
Trump said at Davos last week:
One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil…That war will stop right away.
Oil prices recover from losses
Oil prices, which had dropped sharply earlier in the session, recovered some of those losses following a US policy reversal.
The White House announced late Sunday that it was withdrawing its plans to impose sanctions and tariffs on Colombia.
This decision came after Colombia agreed to accept migrants deported from the US.
The potential sanctions had raised concerns about disruptions to the oil supply chain.
Colombia plays a significant role in the US oil market, having exported approximately 41% of its seaborne crude oil to the US in the previous year, according to data from Kpler, an analytics firm.
The tariffs and sanctions could have impacted this flow, potentially leading to tighter supplies and higher prices.
Russian oil supply remains firm
According to experts and analysts, the Russian oil supply seems to be largely unaffected so far by the fresh sanctions imposed by former US President Joe Biden.
“Putting further pressure on oil are signs that maybe the latest US sanctions are not having a significant impact on Russian oil exports,” Warren Patterson, head of commodities strategy at ING Group, said.
Tanker rates appear to be coming off from their recent highs following the announcement of sanctions against Russia, suggesting that Russian oil is still flowing through the use of Russia’s shadow tanker fleet, despite a large share of this fleet being sanctioned.
Meanwhile, Goldman Sachs analysts argue that Russian oil production will not be impacted by sanctions.
Higher freight rates have incentivized non-sanctioned vessels to transport Russian oil, and the discounted price of Russian oil attracts price-sensitive buyers.
These factors ensure that Russian oil remains available in the market.
Analysts estimate that nearly 20% of the global Aframax fleet faces restrictions, adding to market complexities.
“As the energy sector navigates evolving risks, traders remain cautious about potential supply disruptions and regulatory shifts,” Ali said.
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