Oil headed for a weekly gain as the market digested the implications of a second Trump presidency, including whether it would spur an expansion of stimulus efforts from No. 1 importer China.
Brent crude traded above $75 a barrel, and was up more than 3% for the week. West Texas Intermediate was near $72. China's top legislative body is set to unveil the largest fiscal package since the pandemic on Friday, and there are also signs the prospect of an extended trade war with the US means there will be more stimulus going into next year.
A Donald Trump presidency may be net bearish for crude prices on higher domestic production and tariffs that will weigh on the Chinese economy, according to Citigroup Inc. Standard Chartered Plc said US producers won't necessarily heed Trump's call for more drilling. The president-elect is also expected to clamp down on Iranian oil exports.
"Markets will be awaiting clarity over how much of an increase in US oil supplies there will be," said Yeap Jun Rong, a market strategist for IG Asia Pte. "Potential tariffs on China are on the table as well."
Crude has been on a downward trend since April on tepid Chinese demand and a surge in supply from outside of the OPEC+ alliance, although the prospect of a ratcheting up in hostilities in the Middle East is keeping the market on edge. There are widespread expectations of a glut next year, but there's still a lot of uncertainty that could tighten balances, according to Russell Hardy, chief executive officer of Vitol Group.
"There's still a lot of unknowns around the Middle East, around Iranian exports and Venezuelan exports under a new presidency," Hardy said at a conference in Singapore on Thursday. "So I think it's a little premature to conclude that the market's going to be oversupplied in 2025."
The Federal Reserve cut interest rates by a quarter percentage point on Thursday in a widely expected move. Economists expect the US central bank may have to slow down the pace of easing due to the inflationary impact of Trump policies including tax cuts and trade tariffs.
Brent for January settlement fell 0.2% to $75.45 a barrel at 9:27 a.m. in Singapore. WTI for December delivery declined 0.3% to $72.13 a barrel.
Source: Bloomberg
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