Gold prices steady above $3,400/oz on rate cut bets; PCE data awaited
Investing.com-- Oil prices slipped slightly lower Monday, as optimism over tighter supplies, amid stricter US sanctions against Russia, was offset by caution before President-elect Donald Trump’s inauguration.
At 07:15 ET (12:15 GMT), Brent oil futures expiring in March dropped 0.2% to $80.61 a barrel, while West Texas Intermediate crude futures fell 0.1% to $77.31 a barrel.
Crude prices retreated slightly after recording four weeks of strong gains, as traders awaited news from Washington, with volumes limited by the US holiday.
Trump inauguration in focus for tariffs, energy cues
Markets were now focused squarely on Trump’s inauguration later on Monday, with the President-elect having promised increased trade tariffs on top oil importer China.
Trump also reiterated plans to increase US energy production during a Sunday rally, promising to lift regulations on the domestic energy sector.
Higher US production- which already stood close to record highs of over 13 million barrels per day in 2024- could potentially offset the impact of recent sanctions against Russia by keeping global crude supplies underpinned.
Trump has also vowed to dole out expansionary policies during his term- a trend that could underpin demand in the world’s biggest oil importer. US oil demand was a mixed bag in recent months. While cold weather did spur increased demand for heating fuels, it disrupted travel across large swathes of the country during the travel-heavy year-end holidays.
"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 US holiday today, means that some market participants may have decided to take some risk off the table," analysts at ING said, in a note.
Oil markets weigh demand, supply outlook
Traders were speculating over a somewhat mixed outlook for oil supply and demand. While recent US sanctions on Russia could limit global supplies, this could be offset by demand remaining soft, especially if Trump imposes steep trade duties on China.
China is the world’s biggest oil importer, and has seen a steady decline in its appetite for crude amid persistent economic weakness.
"Output data from China on Friday shows that refineries increased the amount of crude oil they processed by 1.3% year-on-year in December," said ING. "However, for full-year 2024, refinery activity still fell by 3.6% YoY, reflecting weaker domestic demand. Output and trade numbers suggest that apparent oil demand in December came in at a little more than 13.9m b/d, down from 14m b/d the previous month, but up 0.6% YoY."
The People’s Bank of China kept its benchmark loan prime rate unchanged, as widely expected, on Monday.
Beijing is expected to ramp up its stimulus measures in the face of trade headwinds under Trump. Recent data also showed China’s economy improved after Beijing doled out its most aggressive round of stimulus measures in late-2024.
Recent gains in oil have also been curtailed by easing tensions in the Middle East, as Hamas and Israel exchanged hostages and prisoners over the weekend under a recently signed ceasefire, which also saw traders attach a smaller risk premium to oil.
(Ambar Warrick contributed to this article.)