Crude Drops Amidst Trump Volatility
Crude prices remain under pressure on Tuesday with the futures market now down around 6% from recent highs. Trump’s return to office is seen creating plenty of potential headwinds for the oil market. The prospect of heavy international trade tariffs, particularly on China, is firmly bearish for the global demand outlook. Additionally, Trump’s plans to ramp up US crude production is seen as adding a big supply risk to the market at a time when supply/demand forecasts were just starting to even out and underpin crude prices once again.
Trump Plans Big US Crude Production Increase
On his first day in office, Trump outlined plans to heavily increase US oil and gas production, including removing restrictions on drilling in the Arctic, removing the ban on LNG export permitting along with aiming to refill all US energy reserves “right to the top.” Trump’s so-called ‘drill, baby, drill” strategy has been met with concern by oil producers who fear that oversupply will send prices heavily lower, diluting the stability of the industry just as prices were starting to recover.
USD Impact
Movements in the US Dollar are also capping oil prices here. Following a correction lower yesterday as Trump took office, the greenback has since rebounded and is now pushing higher again. If we start to hear more from Trump on tariffs, this is likely to amplify the strong USD/weak oil dynamic near-term. Traders will also be watching the latest EIA inventory data tomorrow for the latest insight into current US demand.
Technical Views
Crude
The sell off in crude has seen the market slipping back under the bear channel highs and below the 77.64 level. While below here, focus is on a deeper correction towards the 72.61 level, in line with weakening momentum studies readings.
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