Oil Prices Rebound Following Trump Election Victory Amid Market Uncertainties

November 07, 2024

11:46 AM

Reading time: 3 minutes


Crude oil prices bounced back on Thursday, stabilizing after a sharp post-election selloff spurred by Donald Trump’s projected victory in the U.S. presidential election. The return of a pro-business administration in Washington, with Republicans also likely to control both houses of Congress, has raised expectations of policy shifts that could impact both the U.S. and global oil markets.

As of early trading in Asia, Brent crude was priced just below $75 per barrel, while West Texas Intermediate (WTI) stood at $71.63. Both benchmarks recovered from losses sustained after Tuesday’s election.

Analysts are split on the potential impact of Trump’s election on oil prices. While Trump’s historical policies have been pro-business, potentially driving demand for fuel, his stance on the Federal Reserve’s easing policies could present challenges for the market.

Phillip Nova analyst Priyanka Sachdeva noted, “Trump’s policies likely support economic growth and fuel demand, but any interference with the Fed could complicate the outlook for the oil market.”

Warren Patterson, head of commodity strategy at ING, highlighted both bullish and bearish influences. “On the bullish side, we could see stricter sanctions on Iran, which could boost U.S. GDP. However, a strong U.S. dollar and potential expansion of oil-and-gas leasing on federal lands pose bearish risks for oil prices,” Patterson explained.

Stricter Sanctions on Iran Could Shake Global Oil Supplies

One of the potential market-shifting policies under the Trump administration could be stricter enforcement of sanctions against Iran, which may limit China’s access to cheap Iranian oil. China has relied heavily on Iranian crude in recent years, and a reduction in this supply could drive up prices unless OPEC adjusts its supply cuts. However, OPEC+ has signaled that any rollback on supply cuts would depend on price conditions, with no immediate plans to increase production in a low-price environment.

Gulf of Mexico Production Disruptions Add Short-Term Price Support

Adding to the market’s uncertainty, Hurricane Rafael, now a Category 3 storm, has forced a shutdown of over 300,000 barrels per day of oil production in the Gulf of Mexico. Analysts expect this disruption to support oil prices in the short term, though the effect may be temporary.

China’s Petrochemical Sector: A Key Driver of Global Oil Demand

Meanwhile, China’s role in global oil demand continues to grow, especially in the petrochemical sector. Giovanni Serio, head of research at Vitol, highlighted the importance of China’s petrochemical industry, which is expected to sustain demand even as growth in the transport sector slows. Speaking at the FT Asia Commodity Summit, Serio explained, “There is no doubt that petrochemicals will be the driving force of oil demand in China and globally because it is less impacted by decarbonization trends.”

Recent data from the International Energy Agency (IEA) indicates that petrochemicals accounted for 90% of China’s oil demand growth from 2021 to 2024, a trend driven by the global need for plastics and other petrochemical products. While China’s demand for gasoline and diesel is showing modest growth, electric vehicles are slowing demand for transport fuels.

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