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London Oil Party Week Is Gripped by Talk of Donald Trump
(Bloomberg) -- The world’s oil traders descended on London this week, and in the bars and hotels of the city’s Mayfair district they were getting re-accustomed to checking their phones for what Donald Trump might say next.
Since returning to the White House, the president has railed against the OPEC+ alliance, pledged to slap tariffs on some of America’s largest energy suppliers, and made initial efforts to end the war in Ukraine.
As the outlook for crude was discussed over dinners and canapes during International Energy Week, Trump dropped conflicting comments on his dealings with Volodymyr Zelenskiy and plans to penalize Canada and Mexico. It’s a rapid-fire approach that has caused a cloud of uncertainty for traders handling millions of barrels a day of oil supplies, with a single cargo worth tens of millions of dollars.
Brent futures have been swinging between $70 and $85 a barrel since October, and while more clarity may emerge in the coming weeks, for now the barrage of policies is making the market too uncertain for many to trade confidently.
“There’s analysis paralysis in terms of what’s coming out of Washington,” Helima Croft, Chief Commodities Strategist at RBC Capital Markets said at a Bloomberg event on Wednesday. “I hear a lot of ‘we don’t know’.”
There were, however, some common themes within Trump’s agenda that dominated conversations. Top of the pile was his plan to end the war in Ukraine.
Before the conflict, Russia was one of Europe’s largest suppliers of crude, but its one-time trade partner all but stopped buying after the war started. Since then, shipments have been re-routed, driving millions of barrels a day to India and China instead. Fuel cargoes have been dispersed to myriad other locations, too.
US-Russia Deal
As Trump pledges to bring down living costs, many traders were of the view that the US may even step in to buy Russian oil before Europe does — if the conflict does come to an end.
“You might have the slightly ironic situation where America is taking Russian oil before the Europeans do, in a large scale way, because of the political attitude towards it,” Ben Luckock, global head of oil at Trafigura Group, said in a Bloomberg TV interview. “Europe, in my opinion, is probably going to be slower to take the oil back.”
That was a common point of conversation among traders, analysts and industry executives throughout the week.
Predictions of large moves in oil futures slipped down the agenda. At the Bloomberg event, 15% of participants saw a chance of prices hitting $100 this year, while a third saw $50, underscoring how hard it’s been to pick a direction.
JPMorgan Chase & Co. said it expects President Trump to prioritize lower oil prices, taking a soft approach to sanctions and potentially pulling crude down to $50 a barrel.
Beneath the relatively stable futures prices, it was large swings in some of the more niche corners of the market that caught traders’ attention.
Prices of sulfurous, dense crudes have rallied against the backdrop of OPEC+ supply cuts, sanctions on the countries that produce such barrels, and the looming risk of disruption to Canadian and Mexican supplies from tariffs.
Some of those factors are also rippling through to refined-fuel markets, which are broadly strong.
High-sulfur fuel oil in Europe traded at the strongest seasonal level since at least 2010 at times this month. Another niche product, high-sulfur vacuum gasoil, has jumped to the biggest premium over crude since April, according to Argus Media.
Markets for sulfurous oil would also benefit if Trump follows through on his pledge to place maximum pressure on Iran.
For the bulls, it was that risk that hovered largest over the market as futures slipped back toward $70 over the week.
“Unfortunately, I think it’s going to escalate in the Middle East again,” said Tor Svelland, founder of Svelland Capital. “We will have headlines, and we could easily push back up towards $80.”
--With assistance from Sherry Su, Bill Lehane, Kriti Gupta and Tom Mackenzie.