Oil prices dropped slightly on Monday as investors expect U.S. President-elect Donald Trump to relax the sanctions imposed on Russia’s oil industry by his predecessor in exchange for a deal to end the war against Ukraine.
Trump will be sworn in as President later today and his inauguration is expected to disrupt various sectors of the world economy, including the Energy sector.
Reuters reported that Brent crude futures dropped 28 cents, or 0.35%, to $80.51 per barrel by 07:39 GMT after closing 0.62% in the previous session.
The price of U.S. West Texas Intermediate slid 21 cents to $77.18 per barrel.
Expected executive orders
Trump is expected to make a number of executive orders on his inauguration day, as promised at a rally at Capital One Arena in Washington, on Sunday.
Investors expect Trump to undo Biden’s suspension of new licenses for LNG export facilities aimed at appeasing green energy groups.
“There is a fair amount of uncertainty across markets coming into this week given the inauguration of President Trump and the raft of executive orders he reportedly is planning to sign.”
“This combined with it being a U.S. holiday today, means that some market participants may have decided to take some risk off the table,” ING analysts quoted by Reuters noted.
The global supply chain
The sanction of over 100 tankers for being in business with Russia and two Russian oil producers, made both Brent and WTI soar as top buyers in China and India scrambled for new suppliers while dealers of Russian and Iranian oil sought unsanctioned tankers to ferry their loads.
The sanctions disrupted the global supply chain with some of the top buyers turning to new dealers.
However, Trump has promised to help end the Russia-Ukraine war quickly.
Analysts believe ending the war would involve relaxing some of the sanctions to enable an accord, they said.
Analyst Tim Evans told Reuters that the new sanctions are seen curtailing supply, at least in the near term.
“Higher tanker rates on unencumbered vessels and a widening backwardation in crude oil calendar spreads have been among the notable ripple effects, reinforcing the concern over supplies,” he said.
Easing tension in the Middle East following the ceasefire and exchange of hostages between Hamas and Israel also kept a lid on oil prices.
Separately, investors are watching out for the impact of a cold snap in Texas and New Mexico which may affect U.S. oil production, analysts at ANZ and ING quoted by Reuters observed.
What you should know
- Brent oil rose above $81 last week following the new sanctions on Russia by U.S. President Joe Biden.
- The fluctuation of global oil prices has led to a hike in the price of fuel in Nigeria, with pump prices around N1,000.
- Nairametrics reported that the Dangote Refinery increased its depot price from N899 to N955 last weekend. The company blamed soaring global oil prices for the hike.
