Investing.com - Fresh unexpected US sanctions on Russian energy may have helped to support oil prices in recent days, but fundamentals for crude are "still weak" and the impact of President-elect Donald Trump's tariff plans looms large, according to analysts at Bank of America (NYSE:BAC).
Triggered by new US sanctions on Russian oil exports and worries over supply disruptions, oil prices recently touched four-month highs, although crude slipped on Tuesday.
Oil had gained strongly over the prior two sessions after the Biden administration introduced its most comprehensive sanctions package to date, aimed at cutting into Russia's oil and gas revenues.
These developments are expected to significantly disrupt Russian oil exports, compelling major importers like China and India to seek alternative suppliers in regions such as the Middle East, Africa, and the Americas.
However, in a note to clients, the BofA analysts argued that oil prices could still see headwinds from "depressed" global trade and potentially softer manufacturing activity readings.
Meanwhile, Trump, who is set to come to power later this month, has vowed to impose tariffs of as much as 10% on global imports into the US and 60% on items coming from China -- the world's biggest oil importer. He has also pledged to slap a 25% surcharge on products from Canada and Mexico.
Economists have flagged that the proposal would not only rattle worldwide trade activity, but also threaten to reignite nagging inflationary pressures.
"With Trump set to hike US tariffs on China and other countries, uncertainty could further depress commerce in [the first half of 2025]," the analysts wrote.
But they did note that air traffic is growing, adding that "distillates could well keep flying on three engines (sanctions, weather, jet) for now." The analysts called this "one bright side" for oil demand.