Oil prices have fallen below $75 per barrel, retreating from recent highs as markets weigh the potential policy direction of President Donald Trump’s second term. After a 10% rally in the past weeks, uncertainty around Trump’s energy and trade policies has created a cautious environment for global markets.
Market Drivers Behind the Drop
- Profit-Taking: Following a peak at $80.77 due to fears of Russian sanctions and strong Chinese economic data, traders are locking in profits ahead of Trump’s inauguration.
- Policy Speculation: Markets are speculating that Trump may relax restrictions on Russia’s energy sector or lift the U.S. moratorium on LNG export licenses. Conversely, possible stricter sanctions on Iranian oil or increased U.S. drilling activity could support future price gains.
- Geopolitical Tensions: The easing of Middle East tensions, including a ceasefire between Israel and Hamas, has reduced the geopolitical risk premium on oil.
China and Trade Policy Concerns
China, the largest oil importer, has been a critical driver of demand growth, with its GDP hitting a 5% target last year. However, concerns over potential aggressive trade tariffs by Trump could weaken demand, adding pressure to oil prices.
Technical Outlook
Oil’s fall below the $75 support level signals a bearish trend:
- Bearish Indicators: A bearish engulfing candle and MACD crossover suggest further declines. Sellers are targeting $70 and the 200-day SMA as potential next levels.
- Reversal Potential: For a bullish move, oil prices must reclaim $75 and push toward $80. Breaking through $80 could pave the way for further gains.
What to Watch
Traders are focused on Trump’s inaugural policy announcements, particularly any changes to trade, energy, or sanctions. These developments, coupled with U.S. drilling activity and global demand signals, will shape oil’s direction in the coming weeks.
