By the renowned financial experts Colleen Howe and Gabrielle Ng
In the aftermath of the U.S. presidential election, oil prices have experienced a rollercoaster ride. Despite a stronger U.S. dollar and higher inventories, the risks posed by a Trump presidency and a looming hurricane in the Gulf Coast have propelled oil prices upwards.
At present, oil futures are up 0.87% at $75.57 per barrel, while U.S. West Texas Intermediate (WTI) crude has gained 0.75% to reach $72.23.
Market analysts like Tony Sycamore from IG suggest that concerns over a Trump presidency impacting oil supply from Iran and Venezuela, coupled with an approaching storm, have outweighed the negative effects of a stronger U.S. dollar and increased inventories.
Despite initial post-election sell-offs, Trump’s pro-business policies are expected to boost economic growth and fuel demand. However, any potential interference with the Federal Reserve’s easing policies could pose challenges for the oil market.
Looking ahead, the oil market may face headwinds in the short to medium term as OPEC plans to ramp up supply capacity in January. Furthermore, historical trends indicate that sanctions may not deter countries like India and China from purchasing oil from Russia or Iran.
Trump is anticipated to reinstate his “maximum pressure policy” of sanctions on Iranian oil, potentially reducing supply by up to 1 million barrels per day. Additionally, Hurricane Rafael’s impact on North America has already led to the shutdown of 17% of crude oil production in the U.S. Gulf of Mexico.
On the inventory front, the U.S. Energy Information Administration reported a rise of 2.1 million barrels to 427.7 million barrels in the week ending on Nov. 1, exceeding expectations for a 1.1 million-barrel increase.
In conclusion, the current geopolitical and environmental factors are driving oil prices higher, presenting both opportunities and risks for investors. Understanding these dynamics is crucial for making informed decisions in the ever-changing financial landscape.
