Oil Falls as President Trump's Bid To Fortify US Energy Continues To Spook Traders

But Aramco chief suggests supply glut fears may be overdone: File Image/Pixabay

US President Donald Trump continued to spook rather than support trading sentiment on Tuesday, with his quest for energy independence falling flat on a group fixated by worries the market will be oversupplied this year.

As a result, crude experienced another decline: Brent settled down 86 cents, or at $79.29 per barrel, while West Texas Intermediate settled down $1.99 to $75.89.

Trump's declaration of a national energy emergency combined with a call to strip regulations in order to encourage investment in the oil community as well as further boost production was the main source of consternation.

Robert Yawger, analyst at Mizuho, pointed out that US oil production is at record levels and the Organization of the Petroleum Exporting Countries (OPEC) still has some 5.8 million barrels per day (bpd) of output curtailed, and that the latter could start being unwound in April.

Yawger added, "What there is a shortage of is demand; if the refiner doesn't need to make more fuel, they're not going to buy the crude."

Other analysts maintained their concern about Trump's threatened 25 percent tariffs against Canada and Mexico; Ole Hansen, head of commodities strategy at Saxo Bank, said, "The tariff threat is real, and it carries the risk of lower economic growth."

However, Tuesday's losses were capped by Trump also stating his administration would likely stop buying oil from Venezuela.

Still, Trump continued to dominate projections and forecasts, as well as uncertainty: Bloomberg noted  that while the lack of immediate U.S. tariffs on China stoked optimism that trade disruptions may not be as severe as expected, "if they are eventually imposed, China could retaliate by buying fewer American agricultural products: the country has already taken steps to diversify its import origins in recent years."

Ass usual on Tuesday, the experts were undecided about where the oil market would ultimately lead this year, and bullish sentiment was still prevalent in some circles.

Amin Nasser, chief executive officer at Saudi Aramco, told media at the World Economic Forum in Davos that global oil demand will grow at a fair clip this year compared to last: "We still think the market is healthy ... last year we averaged around 104.6 million barrels (per day), this year, we're expecting an additional demand of about 1.3 million barrels ... so there is growth in the market."