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Oil Prices Dip as Hurricane Rafael Weakens and Trump Policies Loom

Oil prices fall as Hurricane Rafael weakens, reducing the impact on U.S. oil output. Market speculates on potential Trump administration policies affecting oil prices.

SINGAPORE (Reuters) - Friday saw a slight dip in oil markets, with prices edging lower as fears about Hurricane Rafael’s impact on U.S. oil production began to ease. The storm, which had been threatening crucial oil and gas facilities in the Gulf of Mexico, is now expected to weaken significantly, reducing the potential for long-term disruptions. At the same time, the market is adjusting to expectations surrounding President-elect Donald Trump's upcoming administration and the policies he might introduce that could affect oil supply and demand.

Current Movement in Crude Oil Prices

On Friday, Brent crude oil futures fell by 47 cents (0.6%), settling at $75.16 per barrel as of 0446 GMT. U.S. West Texas Intermediate (WTI) also dropped, down 55 cents (0.8%) to reach $71.81 per barrel. These declines came on the heels of a nearly 1% rise for both benchmarks on Thursday, as traders balanced the effects of changing production conditions with broader economic factors.

For the week, despite these slight drops, Brent crude is positioned for a 3.1% gain, while WTI crude is anticipated to end up about 4.1% higher. These gains have been largely supported by anticipation of potential policy shifts under the incoming Trump administration and renewed optimism around a global economic rebound that could sustain demand for energy.

Hurricane Rafael’s Impact on Oil Prices and U.S. Production

Hurricane Rafael has already caused the temporary shutdown of approximately 391,214 barrels per day of U.S. crude oil production, specifically in offshore Gulf of Mexico facilities. While the storm initially raised concerns of severe production impacts, it is now forecasted to continue westward over the Gulf, moving away from major U.S. oil fields and slowly weakening as it goes. The U.S. National Hurricane Center expects this weakening to progress through the weekend, which should bring relief to operators concerned about prolonged production halts and further price volatility.

Global Market Reactions and China’s Influence on Oil Prices

The recent declines in prices are not solely due to Hurricane Rafael’s waning threat. New economic data from China, the world’s largest oil importer, shows a 9% drop in crude imports for October. This marks the sixth consecutive month of year-on-year declines in Chinese imports, reflecting weakening industrial demand and an ongoing energy transition that has dampened overall consumption. The persistent decline in China’s demand has introduced a bearish note to the market, and analysts are watching closely to see if this trend continues in the coming months.

In the U.S., the rise in crude oil inventories has further added to downward pressures on prices, suggesting that supply levels remain high even as demand stabilizes. This inventory increase has also been a consideration for traders who are assessing the potential balance between supply and demand in the coming winter months.

Potential Impact of Trump’s Policies on Global Oil Prices

Much of the recent interest in oil futures has revolved around the potential policies of the upcoming Trump administration. Analysts are speculating that the new administration might consider tightening sanctions on countries like Iran and Venezuela as part of a broader geopolitical strategy. Should these sanctions materialize, they could restrict oil flows from these nations, tightening supply and potentially leading to upward pressure on prices.

However, analysts at BMI, a unit of Fitch Solutions, have suggested that while there may be initial actions, the long-term impact on oil markets might be limited. BMI stated in a recent note, “We expect that Trump may adopt a more balanced policy approach, either due to institutional checks or due to the influence of moderate advisers within his administration.” This could mean that any radical changes impacting oil supplies might be restrained, allowing global oil markets to remain stable over the next few years.

Outlook for Oil Prices in 2025

Looking further ahead, some market participants believe that the potential changes in U.S. policies could still play a role in shaping supply dynamics, though perhaps more subtly than initially expected. Policies aimed at boosting U.S. production or restricting foreign imports could also have secondary effects on global supply chains and price stability. For now, the market seems to expect that the Trump administration’s approach will likely have a manageable impact on supply fundamentals, particularly if moderate policy advisors continue to shape the administration’s approach.

In the short term, attention will remain on the weather developments surrounding Hurricane Rafael and any announcements from the Trump team that could hint at policy directions. Given the recent inventory levels and China’s reduced import data, the near-term outlook suggests oil markets could experience continued volatility as traders adapt to these factors.