Oil prices stabilized on Thursday, hovering around flat the day after an extremely volatile session, pressured by a strong dollar and lower crude imports in China but supported as some U.S. drillers cut output while bracing for Hurricane Rafael.
All the while the market was trying to guess how President-elect Donald Trump’s policies would affect supplies.
On Wednesday, the electionof Republican former President Trump initially triggered a sell-off that pushed oil down more than $2 as the dollar rallied. Crude prices later pared losses to settle down by less than 1%.
Brent crude oil futures fell 3 cents, or 0.04%, to $74.89 a barrel by 11:35 a.m. EST (1635 GMT). U.S. West Texas Intermediate (WTI) crude lost 7 cents, or 0.1%, to $71.62.
Downside factors include a strong dollar and sluggish demand. But prices drew some support from the view that Trump’s incoming administration may tighten sanctions on Iran and Venezuela, and traders were also watching the conflict in the Middle East, said Saxo Bank analyst Ole Hansen.
The dollar held near four-month highs as investors prepared for several central bank decisions. A strong dollar makes oil more expensive for other currency holders and tends to weigh on prices.
The U.S. Federal Reserve is expected cut interests rates by a quarter of a percentage point at the end of its policy meeting on Thursday. Interest rate cuts typically boost economic activity and energy demand.
“Historically, Trump’s policies have been pro-business, which likely supports overall economic growth and increases demand for fuel,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. “However, any interference in the Fed’s easing policies could lead to further challenges for the oil market.”
Further downward pressure came from data showing that crude oil imports in China fell 9% in October – the sixth consecutive month showing a year-on-year decline – as well as from a rise in U.S. crude inventories.
The expectation of Trump reimposing stricter enforcement of oil sanctions also supported prices.
“The perception is there is going to be tighter sanctions, or enforce the current sanctions, on Iran,” said Phil Flynn, analyst at Price Futures Group.
In his first term, Trump also put in place harsher sanctions on Venezuelan oil. Those measures were briefly rolled back by the Biden administration but later reinstated.
Actual, rather than feared, supply cuts also lent support. In the U.S. Gulf of Mexico, about 17% of crude output or 304,418 bpd has been shut because of Hurricane Rafael, the U.S. Bureau of Safety and Environmental Enforcement said.
Source: Reuters (Reporting by Nicole Jao in New York and Alex Lawler in London; Additional reporting by Colleen Howe and Gabrielle Ng; Editing by David Goodman and David Gregorio)