Oil prices fell more than 1% on Friday as concerns over supply disruptions in the US subsided with Hurricane Rafael weakening.
Meanwhile, the market continued to assess the fallout of the US presidential election.
At the time of writing, the price of West Texas Intermediate crude oil was $71.09 per barrel, down 1.7%, while Brent crude on the Intercontinental Exchange was down 1.5% at $74.52 per barrel.
However, both benchmarks were on course for a more than 2% gain this week.
Hurricane Rafael, which has led to the shutdown of nearly 4 million barrels per day of oil production, is set to move westward over the Gulf of Mexico and weaken from Friday, according to the country’s National Hurricane Center.
Prices rose this week on prospect of more sanctions
After Trump’s victory earlier this week, there were concerns that supply from key oil producers, Iran and Venezuela will decline.
Trump is likely to impose stricter sanctions on Iran and Venezuela, squeezing the market.
This is bullish for oil prices.
Iran produces more than 3 million barrels per day of crude oil, and most of it is taken up by China.
“The upside risk for the oil market is that Trump once again takes a hawkish view against Iran and strictly enforces these sanctions.
This leaves the potential for a loss of more than 1m b/d of supply from the oil market,” Warren Patterson, head of commodities strategy, said in a report.
If this happens, Patterson believes that it could wipe off the surplus from the oil market that is anticipated in the first quarter of 2025.
Trump would likely try to counter any strength in oil prices as a result of this by pressuring OPEC+ to increase output.
This was a fairly common occurrence during his previous term.
China NPC meeting eyed
Investors will now focus their attention on a meeting of China’s National People’s Congress, where the political body is expected to announce more stimulus to boost the economy.
The meeting began earlier this week and will conclude on Friday.
China is the world’s largest importer of crude oil, and notable stimulus measures could prop up demand for oil, boosting prices.
The Asian giant had announced a slew of stimulus packages in October, which was aimed at boosting demand and economic growth.
But, lack of clarity on the spending aspect had weighed on sentiments.
Moreover, any fiscal spending can only be approved by the National People’s Congress in China.
Analysts expect at least 10 trillion yuan ($1.6 trillion) in new spending, with economic growth in the world’s biggest oil importer set to improve on the new measures, according to a Reuters report.
Price outlook
The support for WTI prices has been breached with prices falling below $71.56 per barrel. A sharper sell-off could be seen as prices are below the support, according to Fxempire.
The resistance for WTI prices stood at $72.60 per barrel, which is quite a far way off at present.
For Brent prices, support was seen at $74.20 per barrel, and further down at $73. 78, according to Fxempire.
Resistance was seen at $75.55 per barrel and $76.04 per barrel.
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