Oil prices have been on the rise just 10 days before the inauguration of the second Trump administration.
The energy markets that thrive on speculations and sentiments usually fail to gauge the combination of the latter in order to come up with a reliable forecast in the long run; in this context, the current rally will not spell out a booming oil markets in the coming months, despite the hype.
During the past two weeks, there was a considerable volatility in the oil markets with a notable uptick in the oil prices: as of 17:00 GMT on Friday, January 10, the prices of WTI and Brent were at $76.57 and $79.76 respectively; the price of LNG, liquified natural gas, was at $3.99.
The surge in both oil and gas prices led to the speculation by some analysts in the energy markets that it was all about seeking to make a fast buck before a potential policy change by the incoming US administration in line with the so-called, 'Drill, baby, drill' policy.
President Trump, both during the presidential campaign and after the victory, reiterated that the US will be in full swing, when it comes to producing fossil fuels; at present, the US stands out as the world's top oil producer. He is a staunch supporter of deregulation and sticking to traditional energy sources, while adopting a measured position when it comes to the impact on the environment.
The Biden Administration, meanwhile, tightened the sanctions against the Russian oil and the fleet of tankers stealthily used to transport Iranian oil. The combined impact was felt in the markets as a blow to supply and the sudden development, more or less, contributed to the price hike.
In addition, the northern hemisphere is experiencing a cold front that descended from the Arctic at present. The sudden drop of the temperatures in turn resulted in a sudden hike in demand of gas and heating oil for keeping homes warm; the price of LNG considerably went up too this week in light of colder weather.
Although some analysts predict an year-on-year demand increase, at least for the first quarter of 2025, neither the IEA, International Energy Agency nor the OPEC+ was upbeat about such a scenario; In addition, the US crude stocks that plays a role in reflecting the demand of the commodity in the world's top consumer, started rising again, reflecting the reality on the ground.
President Trump, time and again, vowed that he would cut the cost of energy of the US consumers by half in order to tame the stubbornly high inflation. He hopes that by expanding the production of both oil and gas in the US, he can achieve the goal within a matter of months, if the rest of the producers in the world, the OPEC+ and non-OPEC+ countries jump on the bandwagon; it may be easier said than done, though.
The response of the US oil producers, especially those who are from the shale industry, remains to be seen, though, because, they certainly do not want to flood the markets with the commodity at the expense of their profits.
All in all, the sudden rise in oil prices more of a flash in the pan than a display of light at the end of the tunnel.
