Oil prices slid about 2 per cent to a one-week low on Thursday after US President Donald Trump softened threats toward Greenland and Iran, and on some positive movement that could lead to a solution to end Russia’s war in Ukraine.
Brent futures fell $1.18, or 1.8 per cent, to settle at $64.06 a barrel, while US West Texas Intermediate (WTI) crude fell $1.26, or 2.1 per cent, to settle at a one-week low of $59.36 a barrel.
Trump said he has secured total and permanent US access to Greenland in a deal with NATO, whose head said allies would have to step up their commitment to Arctic security to ward off threats from Russia and China.
European Union leaders, meanwhile, will rethink ties with the US at an emergency summit on Thursday after Trump’s threat of tariffs and even military action to acquire Greenland badly shook confidence in the transatlantic relationship, diplomats said.
“There is a deflation of risk premium related to the Greenland debacle and Iran supply risk has also been reduced,” said Ole Hansen, chief commodity analyst at Saxo Bank.
Trump also said he hoped there would be no further US military action in Iran, but added the US would act if Iran resumes its nuclear program.
Iran, operating under sanctions, is the third-biggest crude producer in the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia and Iraq.
With less tension around Greenland and Iran, oil prices should hold at around $60 a barrel, according to Tony Sycamore, an analyst with online broker IG.
Russia and Ukraine
President Volodymyr Zelenskiy of Ukraine said on Thursday after talks with Trump in Davos that terms of security guarantees for Ukraine had been finalized, but the vital issue of territory in its war with Russia remains unsolved.
Trump has pressured Ukraine to secure peace after nearly four years of war, despite few signs Russia wants to stop fighting.
A deal to bring peace to Ukraine and lift sanctions on Russia, the world’s third-biggest crude producer, could reduce oil prices by making more fuel available on global markets.
The French navy intercepted a Russian tanker in the Mediterranean suspected of being part of a shadow fleet that enables Russia to export oil despite sanctions.
Russian oil output fell 0.8 per cent to 10.28 million barrels per day (bpd) last year, around a tenth of global production, according to data published on Thursday.
In Venezuela, another sanctioned OPEC member, trading houses Vitol and Trafigura were exporting fuel oil under a US-backed deal following capture of Venezuelan President Nicolas Maduro.
A proposed reform of Venezuela’s hydrocarbons law would allow foreign and local companies to operate oilfields on their own through a new contract model, commercialize output and receive sale proceeds even if acting as minority partners of state company PDVSA, drafts seen by Reuters on Thursday showed.
The Trump administration is allowing China to purchase Venezuelan oil but not at “unfair, undercut” prices at which Caracas sold the crude before the US removed Maduro, a US official said on Thursday.
Boosting oil flows from Venezuela could reduce oil prices.
Also weighing on oil prices, forecasts have been trimmed for European corporate health.
Amin Nasser, chief executive of Saudi Arabia’s Aramco , the world’s biggest oil producer, said global oil glut predictions are seriously exaggerated as demand growth remains strong and global oil stocks are depleted.
US oil inventories:
Oil futures extended losses on a bigger-than-expected crude storage build.
The US Energy Information Administration (EIA) said energy firms added 3.6 million barrels of crude to storage during the week ended January 16, more than triple the 1.1-million-barrel increase analysts forecast in a Reuters poll and exceeding the 3.0-million-barrel build that market sources said the American Petroleum Institute (API) trade group reported on Wednesday.
EIA and API released their reports a day later than usual due to the US Martin Luther King Jr. holiday on Monday.
