Oil prices dropped this week as markets responded to Donald Trump’s threat of new tariffs on European Union countries and the Federal Reserve’s more conservative approach to interest rate cuts in 2024.
Brent crude slipped to $73 per barrel, marking a 2% decline for the week. The US benchmark West Texas Intermediate settled near $69, also down 2%.
Trump demanded the EU increase purchases of American oil and gas, warning of potential tariffs if they refuse. This ultimatum comes as the US government inches closer to a shutdown over budget disputes.
The Federal Reserve added pressure to oil markets by announcing fewer interest rate cuts than expected for next year, maintaining its focus on controlling inflation. However, November’s inflation data came in lower than anticipated, helping crude prices recover some losses on Friday.
“The Fed’s stance isn’t great news for risk assets like oil,” said Bart Melek at TD Securities, highlighting the connection between monetary policy and commodity prices.
Oil prices have remained surprisingly stable since October, showing the least volatility since 2019. This stability persists despite significant market forces at play: China’s sluggish demand, increased production from the Americas, and potential sanctions on Iran and Russia.
The G7 nations are now considering stricter measures on Russian oil sales. Options range from completely banning Russian oil to lowering the current $60 per barrel price cap to $40, according to sources close to the discussions.
Adding to market complexity, Russia’s Transneft pipeline operator stopped oil flows to Belarus and parts of Europe due to technical issues. The pipeline is a crucial supply route for several European countries and Kazakhstan’s oil exports to Germany.
