Oil Steadies After Jumping on Trump’s Hawkish Russia Rhetoric
(Bloomberg) -- Oil steadied following its biggest jump since July, after US President Donald Trump’s increasingly hawkish rhetoric on Russia raised geopolitical risk.
Brent traded above $69 a barrel after gaining 2.5% on Wednesday, while West Texas Intermediate was near $65. Trump said that NATO nations should shoot down Russian aircraft that violated their airspace and that Europe should stop purchasing energy from the OPEC+ member, leading oil investors to cut bearish positions.
Meanwhile, US government data showed nationwide crude inventories declined to the lowest since January, adding to the bullishness. However, concerns over a looming glut were amplified after oil companies in Iraq’s Kurdistan agreed with the federal and regional governments to resume pipeline exports that have been halted for more than two years.
Oil exports will resume from the Kurdistan region “most likely this week,” Iraq’s Foreign Minister Fuad Hussein said in an interview, adding that future oil flows could reach as much as 500,000 barrels a day with new investments and new fields. The pipeline is expected to initially bring about 230,000 barrels a day to international markets, people familiar with the matter said earlier this week.
“The oil market’s being pulled in two directions right now,” said Haris Khurshid, Chicago-based chief investment officer at Karobaar Capital LP. “US draws and Russian supply risks argue bullish, but Iraq resuming Kurdish exports adds a bearish offset,” he said, adding that Trump’s statements on Russia could “spook energy markets” and lead traders to preemptively “price the risk.”
Oil futures have been stuck in a narrow range since early August as traders balance a bearish fundamental outlook against escalating geopolitical tensions. Market watchers led by the International Energy Agency are forecasting a glut later in the year due to increased output from the Organization of the Petroleum Exporting Countries and its allies, as well as from outside the group, especially in the Americas.
Trump has reversed past claims that Ukraine has “no cards to play” in the war, but hasn’t offered any new US steps to support Kyiv and instead increased the pressure on Europe. A full European Union ban on Russian oil imports is “unlikely” as a few member states — Hungary and Slovakia in particular — rely heavily on the flow and face “low incentives” to support this scenario, Goldman Sachs Group Inc. said.
Ukraine has again interrupted Russian energy infrastructure, with two key oil ports on Russia’s Black Sea coast temporarily halting loadings after overnight warnings of drone strikes, as Kyiv steps up its campaign to cut Moscow’s main source of funds.
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