Oil prices have risen slightly following the US presidential election, as investors weigh the potential impact of a Trump presidency on oil supply and the effects of an approaching hurricane in the Gulf Coast.
According to Reuters, Brent crude oil futures went up 29 cents, or 0.39%, to $75.21 per barrel, and US West Texas Intermediate (WTI) crude has risen 18 cents, or 0.25%, to $71.87.
Trump supports fossil fuels. During his first term, he rolled back over 100 environmental regulations and withdrew the US from the Paris Agreement.
The concerns about Trump’s policies, which could lead to increased sanctions on Iran and Venezuela, are offsetting the stronger US dollar and higher-than-expected US inventories.
“Historically, Trump’s policies have been pro-business, which likely supports overall economic growth and increases demand for fuel. However, any interference in the Fed’s easing policies could lead to further challenges for the oil market,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“With the bumper surge in the dollar hovering at near 4-month highs, oil seems to be talking about massive headwinds in the aftermath of the US election results,” Sachdeva added.
Donald Trump is expected to reimpose his “maximum pressure policy” of sanctions on Iranian oil. That could cut supply by as much as 1 million barrels per day, according to an Energy Aspect estimate.
Notably, Trump in his first term had also put in place harsher sanctions on Venezuelan oil, measures that were briefly rolled back by the Biden administration but later reinstated.
Moreover, US crude inventories rose by 2.1 million barrels to 427.7 million barrels in the week ending on Nov. 1, the US Energy Information Administration said on Wednesday, compared with expectations for a 1.1-million-barrel rise.
Despite these factors, the upside to oil markets may be limited to the short to medium term as OPEC is expected to increase supply capacity in January, while historical trends do not suggest sanctions will prevent India and China from continuing to purchase oil from Russia or Iran, Sachdeva said.
Meanwhile, Hurricane Rafael has shut down of Gulf of Mexico oil production, adding to the supply concerns.
In North America, Hurricane Rafael intensified into a category 3 hurricane on Wednesday, and about 17% of crude oil production or 304,418 barrels per day in the US Gulf of Mexico had been shut in response, the US Bureau of Safety and Environmental Enforcement said.
