Oil Prices Drop Year-Over-Year Due to Market Exit

Oil prices reached their lowest closing level of the year as traders persistently exited the market in the weeks following President Donald Trump’s inauguration. West Texas Intermediate experienced a decline of 2.3%, settling at $71.03 per barrel on Wednesday. This downturn is attributed to Trump's stances on various issues, including military actions in the Middle East and energy tariffs, which have negatively impacted market sentiment. According to JPMorgan Chase & Co. analyst Tracey Allen, the withdrawal of investors from crude and fuel markets resulted in a net outflow of $17 billion during the week ending January 31. “Traders are currently retracting their positions on crude,” stated Joe DeLaura, a former trader and global energy strategist at Rabobank. “We anticipate that crude prices will continue to decline until the next geopolitical event stimulates a price increase.” The decline on Wednesday followed a report indicating that the Trump administration plans to announce strategies to conclude Russia’s conflict with Ukraine by the following week, a development that could mitigate the risk of energy supply disruptions. Additionally, Beijing's measured response to Trump's tariffs has intensified the trade conflict between the two largest economies in the world, further pressuring prices. “Yesterday’s recovery in response to Trump’s ‘maximum pressure’ strategy regarding Iran has proven to be fleeting,” noted Fawad Razaqzada, an analyst at City Index and Forex.com. “The adverse impact of a US-China trade war on demand, coupled with increasing global supplies, is suppressing prices.” While investors generally perceive Trump’s actions as bearish for oil, his positions on the Israel-Gaza conflict and sanctions against Iran may continue to create volatility in the market. On Tuesday, the president issued a directive instructing Treasury Secretary Scott Bessent to implement sanctions and enhance enforcement of existing measures to intensify pressure on Tehran. He also suggested that the US should take control of the Gaza Strip, a proposal that has drawn criticism from Arab nations, including Saudi Arabia, the leader of OPEC+. Oil Prices: WTI for March delivery fell 2.3% to $71.03 a barrel in New York. Brent for April settlement slid 2.1% to $74.61 a barrel.