In a significant turn of events within the international oil market, prices have taken a notable hit this week, declining by 3.53%. This downturn comes after a sustained period of growth that lasted four consecutive weeksThe primary driving force behind this decline appears to be pressure exerted by the American president, who has implemented an aggressive strategy aimed at stabilizing domestic prices and curbing international fluctuations.

Looking back at recent history, the average price of Brent crude oil during the presidential term from 2017 to 2020 settled at $58.41 per barrelThis figure marks a substantial decrease of 23.82% when compared to the average prices observed during the previous administrationAnalysts point out that a review of the current president’s governing tactics indicates a consistent trend of applying downward pressure on international oil pricesNotably, there is an additional layer of pressure with ongoing attempts to persuade OPEC (the Organization of the Petroleum Exporting Countries) to increase oil production in order to counter price hikes.

However, it's important to recognize that market dynamics remain complex and influenced by multiple factorsAnalyst Li Yan from Longzhong Information has highlighted potential game-changers that could emerge within the market, particularly regarding sanctions against IranShould both Europe and the United States intensify their sanctions, the impact could be devastating for Iranian oil production, which might plummet by over one million barrels per daySuch a deficiency on the supply side could inadvertently stabilize or even push oil prices higher due to perceived scarcity.

Further complicating the landscape, there's a growing trend among international speculators who seem undeterred by current price drops, actively maintaining bullish positions on crude oilAs of the week ending January 21, 2025, net long positions in both Brent and WTI crude oil markets have surged by 27,569 contracts, reaching a total of 492,299 contracts, marking a nine-month high.

The recent announcement from the U.S. president regarding plans to bolster domestic oil production has directly influenced international energy costs

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The president’s strategy includes urging OPEC to lower oil prices significantly, a maneuver aimed at undercutting Russian financial resources that rely heavily on oil revenues stemming from their extensive production capabilitiesConsequently, international crude oil prices have responded with a noticeable downturn, as evidenced by WTI futures tumbling over 3% this week.

On January 25, 2025, WTI crude for March delivery was priced at $74.66 per barrel, reflecting an aggregate drop of roughly 3.53% from the previous weekSimilarly, Brent crude futures for March settled at $78.50 per barrel, showing an overall decline exceeding 2.83%. Interestingly, during this period, natural gas prices on the NYMEX have seen a slight resurgence, with February futures rising approximately 2.08% to settle at $4.0270 per million British thermal units, translating to a cumulative increase of 2.00% for the week.

The president’s commitment to an affordable energy policy reflects a determination to ensure low fuel costs for the American populaceHistorical data reveals that during his last term, the average retail price for gasoline in the U.S. was $1.61 per gallon, well below the $2.45 per gallon benchmark set during previous administrationsWith rising prices being a crucial concern for citizens, the current administration is pushing to remove restrictions on oil drilling immediately, indicating a clear intention to ramp up domestic production furtherThis move is likely to administer additional pressure on international oil prices from the supply chain standpoint, posing a long-term threat to crude oil cost stability.

Li Yan emphasizes that the current direction of energy policy under the new administration reveals a pronounced focus on domestic energy resources, specifically the prioritization of crude oil extractionIn addition, the president's trade strategies lean heavily towards protectionism, potentially at the expense of diplomatic engagements relating to ongoing conflicts, thus allowing factors contributing to lower prices to reign dominant in shaping oil market trajectories.

An interesting development arose on January 25 when the president once again urged OPEC to take action towards reducing oil prices

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The potential removal of production limits by OPEC could lead to a more relaxed global supply situation, consequently exerting downward pressure on international oil prices.

The outlined plans from OPEC+ indicate a gradual increase in production starting in April 2025, which is expected to proceed at a rate of about 120,000 barrels per day each month until September 2026. This collaborative group, comprising OPEC members alongside Russia and several other nations, collectively controls more than 40% of the world’s crude oil output, underscoring their pivotal role in global oil dynamics.

Li Yan also cautions that alongside the pressures from OPEC's planned increases, market participants must remain vigilant over the implications of U.S. and European sanctions potentially impacting Iranian oil outputMotivated by previous sanctions, the U.S. withdrew from the Iran nuclear deal in May 2018, which precipitated a significant drop in Iranian oil production — falling nearly 49% from pre-sanctions levelsAs pressure has subsided, Iranian production has rebounded, revealing the volatility of supply responses to political maneuvers.

If global sanctions on Iran deepen, it could result in further declines in Iranian output, potentially exceeding a million barrels per dayThis creates significant risks for global supply chains and might provide unexpected support for oil prices, despite prior predictions of continued price dropsThere is also the possibility of amplifying sanctions against Russia to intensify pressure and catalyze a quicker return to negotiations regarding conflicts that have drawn international concern.

Nevertheless, Russia's oil exports have resiliently maintained steady levels since the onset of Western sanctions back in 2022, leaving market participants wondering about the ultimate effectiveness of such measuresOn the domestic front, current U.S. oil pricing structures may not support extensive further decreasesA recent survey conducted by the Kansas City Federal Reserve indicated that for production levels to respond positively, oil prices would need to rise to around $84 per barrel — far above the current rates hovering around $74.

J.P

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Morgan forecasts that U.S. oil prices may decrease further, potentially reaching $64 by year-end, with shale oil activities likely experiencing a steep decline thereafterIn this convoluted landscape of projected price shifts and geopolitical influences, market sentiment continues to teeter under the weight of uncertainty and speculation.

As political influences linger and desires within the oil markets shift, it's apparent that speculators remain bullish on crude oil assets despite recent volatilityIn examining speculative positions, data as of January 21, 2025, reveals WTI crude traders have upped their net long positions by 21,163 contracts to reach 236,354 contracts, while significant climbing has been observed across both Brent and WTI markets, summing up to a total of 492,299 net long contracts — a nine-month peakFurthermore, natural gas investors have likewise scaled their bullish positions, reflecting the optimism permeating across multiple facets of the energy market.

In the background, as of January 17, 2025, the U.SEnergy Information Administration reports commercial crude oil inventories stood at 411.7 million barrels, marking a decrease of 1.017 million barrels from the week priorConversely, gasoline inventories showed a notable increase, accumulating to 245.9 million barrelsThis decrease aligns with a historical trend, signaling ongoing reductions in crude oil inventories over the preceding nine weeks, shrinking to their lowest levels since March 2022.

Industry analyst Li Xinyue from Zhaocai Information observed that this recent plunge in commercial crude inventories shouldn’t simply be attributed to strong refinery demand but rather to declines in domestic production levelsThis trend, impacted by cold weather conditions, precipitated a decrease in refinery operating rates, showcasing the direct correlation between external environmental factors and internal market responses in production dynamics.