Oil Extends Decline as Trump’s Trade Curbs Undermine Sentiment
January 27, 2025
Oil prices continued their downward trend on Monday as market sentiment weakened following former U.S. President Donald Trump’s renewed calls for stringent trade curbs. The prospect of escalating trade tensions has raised concerns about global economic growth, dampening demand for crude oil.
Market Reactions
Brent crude futures fell by 1.8% to $76.45 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 2.1% to $70.12 per barrel as of early trading hours. This decline extends last week’s losses, driven by mounting fears that protectionist policies could curb economic activity and energy demand.
“The market is reacting to heightened trade uncertainty,” said analyst John Carter from Global Energy Markets. “If these policies come into effect, they could significantly impact demand projections for 2025 and beyond.”
Trump’s Trade Policies and Market Sentiment
Trump, who is leading Republican polls for the 2024 presidential election, has vowed to impose stricter tariffs on key trading partners, particularly China and the European Union. His proposed measures include higher levies on imported goods and penalties for companies outsourcing manufacturing jobs.
The potential for a tit-for-tat trade war has unnerved investors, as previous disputes between the U.S. and China during Trump’s presidency led to volatility in global markets and a slowdown in industrial production.
“The oil market is sensitive to geopolitical risks and trade tensions,” said Sarah Liu, an economist at Energy Insights. “Should these curbs materialize, we may see a prolonged bearish trend in crude prices.”
OPEC+ Response and Supply Concerns
In response to weakening demand signals, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) may consider further production cuts to stabilize prices. Sources close to the group indicated that a meeting scheduled for next month could see discussions on output adjustments.
Despite this, some analysts remain skeptical about the effectiveness of production cuts in offsetting declining demand. “Even with supply-side interventions, the overarching concern remains economic uncertainty,” said Carter.
Outlook for the Oil Market
Looking ahead, oil market participants are closely monitoring developments in U.S. trade policy and upcoming economic data from China, the world’s largest crude importer. Any signs of slowing demand from Asia could exert additional downward pressure on prices.
Traders are also awaiting the Federal Reserve’s next interest rate decision, which could influence the strength of the U.S. dollar. A stronger dollar typically makes oil more expensive for holders of other currencies, further weighing on demand.
As markets digest the implications of Trump’s proposed trade policies, volatility is expected to persist in the near term.
“Until we have greater clarity on trade policy, investors should brace for continued fluctuations,” Liu concluded.
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Reference : yahoo