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Oil Drops as Traders Gear Up for Trump at Davos and IEA Snapshot

(Bloomberg) -- Oil fell as wider markets were jolted by US President Donald Trump’s attempts to annex Greenland, and traders waited for fresh insight into the outlook for a huge surplus from the International Energy Agency.

Brent dropped toward $64 a barrel, while West Texas Intermediate was below $60. The American push to seize the Arctic territory has thrown US-EU alliance into doubt, eroding appetite for risk assets including stocks as well as commodities such as oil. Crude volatility remains elevated.

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Crude has been under pressure from expectations supply will outpace demand this year, with the IEA — which is due to release its monthly outlook later on Wednesday — predicting a major glut. Venezuelan exports were also in focus, with traders tracking where the oil, which previously was mostly shipped to China, could be redirected after the US intervention earlier this month.

For “at least three-four years, we may well see downward pressure on oil and gas prices because of the huge amount of supply coming from the US and some other countries,” IEA Executive Director Fatih Birol said during a panel discussion at the World Economic Forum in Davos, Switzerland, on Tuesday.

President Trump is scheduled to address the Davos forum later Wednesday, altnhough his departure from the US was delayed by more than two hours because of a mechanical issue on the plane he was flying on. Ahead of the remarks, the US administration has vowed to slap 10% tariffs on eight European nations over the Greenland dispute, raising the specter of renewed trade frictions that could hurt growth and drag on energy demand.

Still, pockets of tightness remain, with crude’s prompt spreads — at present the gap between the March and April contracts — holding in backwardation, a bullish pattern. Halted output at a major Kazakh field, as well as constrained loadings at the Black Sea’s Caspian Pipeline Consortium facility, are boosting physical-market strength.