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(Bloomberg) — Oil headed for a fourth straight weekly gain ahead of President-elect Donald Trump’s second term, with traders seeking clarity on far-reaching sanctions and trade policies.
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West Texas Intermediate traded below $79 a barrel, up about 3% this week, while Brent closed above $81. Trump’s advisers are crafting a wide-ranging sanctions strategy to try to facilitate a Russia-Ukraine diplomatic accord, while also squeezing Iran and Venezuela, according to people familiar with the matter. Fresh trade tariffs may also disrupt global flows.
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“I don’t think they’re going to rush into sanctions” when Trump takes office, Hartree Partners LP Senior Adviser Ed Morse said on Bloomberg Television. There may be many new executive orders, but “tariffs and sanctions are going to be put in the background, and it’ll be a little bit of a wait-and-see,” he said.
A week ago, the Biden administration released its harshest ever curbs on Russian oil. The impact of the move is still reverberating through the global crude market, with freight costs rocketing and long-standing buyers of Russian oil including China and India looking elsewhere for supplies.
Crude has rallied strongly since the year began, as cold weather in the northern hemisphere winter pushes up heating demand, US crude stockpiles decline to seasonal lows, and the sanctions threaten to throttle supply. Trump, who will be sworn in on Monday, has promised to slap tariffs on Canada, including on its oil. While Canada is pushing back, the leader of its largest oil-producing province is resisting such efforts.
Physical markets have also strengthened. The gap between Brent’s two nearest contracts, known as the prompt spread, has widened in a sign of tighter conditions. The gap was last at $1.38 a barrel in backwardation, compared with just 39 cents a month before. In the Middle East, grades including Murban and Oman have soared relative to benchmarks.
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