Oil prices fell on Wednesday, extending the previous session’s declines, as markets weighed U.S. President Donald Trump’s declaration of a national energy emergency on his first day in office and monitored his tariff policies.
Brent crude futures fell 36 cents, or 0.5%, to $78.93 a barrel at 0730 GMT. U.S. West Texas Intermediate crude futures fell 46 cents, or 0.6%, to $75.37.
Contracts settled lower on Tuesday after Trump laid out a sweeping plan to maximize oil and gas production, including declaring a national energy emergency to speed up permits, remove environmental protections and withdraw the U.S. from the Paris climate agreement.
Yip John Runge, market strategist at IG, said: “Market participants are trying to absorb the mixed signals that Trump 2.0 brings to the oil price trajectory.”
“The focus in the short term will be on whether his goal of filling U.S. strategic reserves is achieved,” Yapp said.”
Analysts at Morgan Stanley wrote in a note that Trump’s latest energy policy is unlikely to spur investment in the short term or change U.S. production growth, adding that it could mitigate the potential erosion of demand for refined products.
Analysts also questioned whether Trump’s promise to refill the Strategic Reserve would trigger any changes in oil demand as the Biden administration was already buying oil for emergency stockpiles.
Meanwhile, investors were cautious as Trump said he was considering imposing 25% tariffs on imports from Canada and Mexico from Feb. 1, not on his first day in office as he had previously promised.
“Oil market attention is slowly shifting away from U.S. sanctions against Russia toward President Trump’s potential trade policy,” analysts at ING said on Wednesday, adding that the energy complex had come under pressure with the growing threat of tariffs.
Oil prices try to stabilize amid political and occasional pressure
U.S. crude oil (WTI) prices are trying to stabilize on Wednesday after finding support at the 200-day Simple Moving Average (SMA) at $75 per barrel. The latter momentum has veered downside, exacerbated by political uncertainty during Trump’s first days in office. This decline follows a retreat from the previously excessive bullish momentum, which saw the entry of the Relative Strength Index (RSI).) to overbought after months of sideways consolidation around $70. The longer-term outlook remains bullish, provided the decline does not deepen towards $72 a barrel, a level that could fuel fears of extended consolidation.
Essentially, Trump’s sweeping policies to maximize U.S. oil and gas production pose potential challenges to oil prices, as increased domestic supply may affect the market. However, despite President Joe Biden’s efforts to shift away from fossil fuels, U.S. producers have continued to drill at record levels, benefiting from higher prices in the wake of sanctions on Russian exports. This activity suggests that spare production capacity may be limited, providing a degree of support to oil prices.
Oil markets may face further downward pressure due to an oversupply scenario amid weak demand expectations. In addition, a potential resolution to shipping cuts in the Red Sea, subject to the successful implementation of a ceasefire in Gaza, could also exert downward pressure on prices.
On the other hand, the expected 25% tariffs on Canadian imports are likely to provide a cushion for oil prices. Since Canada exports most of its crude oil to the United States, often at a discount, these tariffs could push U.S. crude oil prices higher. For now, traders appear to be profiting and are waiting for more clarity on how Trump-era policies will affect the broader oil market.
Gasoline prices expected to fall in America until 2026
In our short-term energy forecast for January, we now forecast retail gasoline prices in the United States through the end of 2026. We estimate that average gasoline prices in the United States in 2025 will fall by 11 cents a gallon, or about 3%, compared to 2024. In 2026, we expect a further decline of about 18 cents a gallon, or an additional 6%.
Low gasoline prices in the United States are primarily due to lower crude oil prices, as well as lower gasoline consumption in 2026 due to increased fleet-wide fuel economy. Lower U.S. refinery capacity during the forecast period may offset some of the downward pressure of lower crude oil prices on gasoline prices.
Our forecast for lower retail gasoline prices in the United States over the next two years follows the decline from 2023 to 2024, following a rise in retail prices in 2022. We estimate that the decline in gasoline prices in 2025 and 2026 will be smaller than the decline between 2022 and 2023, when prices fell by 11%.
The smaller range of price declines over the next two years is primarily due to the fact that despite lower crude oil prices, this effect is offset to some extent by an increase in refining margins. In 2023 and 2024, annual gasoline prices fell because crude oil prices fell and refining margins shrank.
In 2025, we expect gasoline price differentials – the difference between wholesale gasoline prices and crude oil prices that we use as an estimate of refining margins – to be wider than in 2024. This forecast reflects our expectation that U.S. refining capacity will decrease next year compared to last year.
