CRUDE OIL PRICES - IMPACT OF US POLICIES

CRUDE OIL PRICES - IMPACT OF US POLICIES

Crude oil futures fell in Asian trading on February 5, although not as sharply as the previous day, when President Trump signed a document detailing his tough stance on Iran, causing the market to narrow losses after China imposed retaliatory tariffs on the US.

At 15:30 Singapore time, the ICE Brent crude oil futures contract for April delivery fell 39 cents/barrel (0.51%) from the previous close of $75.81/barrel, while the NYMEX light sweet crude oil contract for March delivery fell 28 cents/barrel (0.39%) from the previous close of $72.42/barrel.
"The rise in crude oil prices, as reflected in yesterday's late-session price action, is a directive from President Trump to increase economic pressure on Iran," said ING's head of commodity strategy.

Market analysts saw nothing surprising in the move, as President Trump took a similarly tough stance on Iran during his first term.

ING's head of commodity strategy added that Trump's encouragement of OPEC to increase oil production could avoid Iran's potential losses. However, convincing the group to follow through and increase production could be a challenge at current prices.
However, the upside in crude oil prices has been limited by weak demand signals.

US crude oil inventories jumped by 5.025 million barrels in the week ended January 31, marking the third consecutive weekly increase in inventories, according to data from the American Petroleum Institute late on February 4. The latest figure beat market expectations for a 3.17 million barrel increase.

“Prices showed signs of recovery on Sunday night, but the commodity has retreated during the session and prices have now fallen below last week’s low of $75 a barrel, negating the possibility of a further decline. The next significant support level is around the December low of $72 a barrel,” Beauchamp added.
Amid geopolitical uncertainty, analysts said investors could find opportunities in North American trade activity due to the 30-day suspension of US tariffs on imports from Canada and Mexico.

“The agreement focusing on border security represents a shift from purely trade policy to a broader diplomatic approach, which is likely to impact a variety of sectors differently… However, the potential for future tariff changes remains a source of market uncertainty that traders should monitor closely,” ING said.