Oil prices saw a slight uptick on Thursday as market participants adjusted to the fallout from the US presidential election.
Despite initial concerns about the strength of the US dollar, which had risen to a four-month high following Donald Trump’s election victory, fears of supply disruptions tied to his potential policies and a developing storm in the Gulf of Mexico outweighed the currency’s boost.
Brent crude oil futures rose by 29 cents, or 0.39%, to $75.21 per barrel, while US West Texas Intermediate (WTI) crude gained 18 cents, or 0.25%, to $71.87. These modest gains followed a sell-off triggered by Trump’s win, which had earlier pushed oil prices down by more than $2 per barrel, as the dollar surged to its highest level since September 2022.
Despite the dollar’s strength and rising US inventories, market analysts noted that the upside risk for oil was supported by Trump’s expected return to his “maximum pressure” sanctions policy, which could further squeeze oil supply from key producers like Iran and Venezuela. Additionally, the impact of Hurricane Rafael, which forced the shutdown of 17% of US Gulf of Mexico oil production, added to supply concerns, driving up prices.
“Concerns around a Trump presidency squeezing oil supply from Iran and Venezuela as well as an approaching storm more than offset the post-election impact of a stronger US dollar,” said Tony Sycamore, a market analyst with IG.
He also noted that the US crude inventory rise of 2.1 million barrels was larger than expected, but still failed to curb supply-side fears.
During his first term, Trump imposed stringent sanctions on both Iran and Venezuela, reducing their oil exports significantly. With his re-election, markets are anticipating a reimposition of these sanctions, which could further disrupt global supply. Analysts estimate that sanctions on Iran alone could remove up to 1 million barrels per day from global markets.
Additionally, China’s October crude imports fell by 9%, marking a sixth consecutive month of decline. The drop, along with weaker demand from independent refineries, compounded market uncertainty surrounding demand. However, Priyanka Sachdeva, senior market analyst at Phillip Nova, pointed out that historical trends suggest sanctions may not stop large buyers such as India and China from continuing to purchase oil from sanctioned states like Russia and Iran.
Looking ahead, analysts are divided on the potential long-term impact of Trump’s energy policies on oil prices. On one hand, Trump’s pro-growth approach to energy production could lead to increased domestic supply, potentially limiting price rises. On the other hand, his influence on OPEC+ and potential trade policies could still cause volatility in the short term. Citi analysts forecast that prices may average $60 per barrel next year, influenced by a mix of higher oil production and potential import tariffs.
“While Trump’s administration may increase production and use influence on OPEC+, it could also depress prices due to higher supply… However, despite the pro-oil agenda, the immediate impact on physical oil markets may be limited,” Citi analysts noted.
Moreover, the market is closely watching Trump’s potential to leverage his influence to encourage OPEC+ to boost production in response to tighter supplies, including potential releases from floating storage.
In North America, disruptions from Hurricane Rafael, which intensified into a Category 3 storm, were another concern for the market. As of Wednesday, 17% of crude oil production in the US Gulf of Mexico was shut down, impacting nearly 305,000 barrels per day.
While uncertainties about Trump’s policies remain, it is clear that his second presidency is likely to have a significant impact on both supply and demand dynamics in the oil markets. In the short term, analysts expect fluctuations in prices, driven by these geopolitical and supply-side risks, but any broader trends will depend heavily on the policies of the new administration.
Reuters and OilPrice.com contributed to this report.
