MW Oil turns lower as traders assess Trump tariff threats, efforts to lower crude prices

By Myra P. Saefong and William Watts

EIA reports ninth straight weekly decline in U.S. crude supplies

Oil futures turned lower Thursday after President Donald Trump said he would ask Saudi Arabia and OPEC to lower oil prices, implying that he would pressure major oil producers to boost output.

The president has also threatened import tariffs on China, raising worries about demand from the world's largest crude importer, and against Canada and Mexico, which may crimp crude supply for U.S. refiners.

Price moves

-- West Texas Intermediate crude CL00 for March delivery CL.1 CLH25 fell 56 cents, or 0.7%, to $74.88 a barrel on the New York Mercantile Exchange after prices posted declines in each of the last four trading sessions.

-- March Brent crude BRN00 BRNH25, the global benchmark, was down 63 cents, or 0.8%, at $78.37 a barrel on ICE Futures Europe after a five-session decline.

-- February gasoline RBG25 tacked on 0.3% to $2.0629 a gallon, while February heating oil HOG25 shed 0.2% to $2.4801 a gallon.

-- Natural gas for February delivery NGG25 traded at $3.897 per million British thermal units, down 1.6%, after trading as high as $4.048.

Market drivers

The main reason oil sold off is because Trump is calling on the Organization of the Petroleum Exporting Countries to lower oil prices, Phil Flynn, senior market analyst at the Price Futures Group, told MarketWatch, referring to comments made by the president at the World Economic Forum in Davos on Thursday.

While the market is reacting to the downside about the possibility of OPEC raising production, there's also the reality that OPEC "may have to raise production as ...Trump starts to enforce sanctions on Iran and Russia," Flynn said.

Oil prices were trading more than 3% lower this week, feeling pressure after Trump took office vowing to boost U.S. crude production that already hit a record last year, though questions remain around how producers will respond.

"Plans to materially ramp up domestic oil and gas production is negative for prices from a supply standpoint," said Tyler Richey, co-editor at Sevens Report Research, in Thursday's newsletter. On the other hand, "economic expectations for 2025 are solid thanks to the anticipation of Trump and the Republicans' pro-growth agenda, and that is a positive for consumer demand expectations."

Crude prices had rallied into the new year, boosted in part by wider sanctions against Russia imposed by the outgoing Biden administration.

"President Trump has made the return of energy dominance a key policy pillar of his new administration. There has been a flurry of executive orders seeking to open more spaces up for drilling and lessen the regulatory burden on U.S. energy companies. However, it remains hard to see how these measures will spark an immediate flood of output that could push prices significantly lower if he does indeed adopt more coercive measures against key foreign producers," said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.

Read: Oil traders make big bets on Trump policies. The path for prices isn't so clear.

So far there's been no indication Trump is looking to reverse the added sanctions on Russia imposed by Biden, and it still appears likely the new administration will increase pressure on Iran, Croft said.

Trump, in a social-media post on Wednesday, said that unless Russia moved to make a deal to end its war with Ukraine, the U.S. would "have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries."

Supply data

Traders also looked to the latest report from the U.S. Energy Information Administration showing that commercial crude inventories fell for a ninth week in a row, but gasoline stockpiles climbed as demand weakened.

Domestic commercial crude supplies fell by 1 million barrels for the week that ended Jan. 17, according to the EIA report. The data were expected to show a fall of 2 million barrels on average, according to a survey of analysts conducted by S&P Global Commodity Insights. Late Wednesday, the American Petroleum Institute reported a crude inventory gain of 1 million barrels, according to a source citing the data.

Read more: U.S. crude supplies fall for 9th week in a row

Natural-gas prices, meanwhile, pared some of their early gains after the Energy Information Administration reported Thursday that U.S. natural-gas supplies in storage declined by 223 billion cubic feet for the week that ended Jan. 17.

That was below the average analyst forecast for a drop of 251 bcf, according to a survey conducted by the Wall Street Journal.

-Myra P. Saefong -William Watts

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January 23, 2025 12:47 ET (17:47 GMT)

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