Investors believe that the Trump administration will strengthen the value of the dollar, as interest rates will need to be kept high to combat inflation that may result from the imposition of tariffs and new policies that may increase pressure on China’s economy, which could weaken demand there.
Brent crude futures fell $1.04, or 1.4 percent, to trade at $74.49 per barrel by 1146 GMT, while US West Texas Intermediate crude fell $1.04, or 1.4 percent, to $70.95 per barrel.
And besides high Dollar Casting a shadow over commodity prices, a Trump presidency may see the adoption of policies that would increase pressure on the economy of China, the world’s largest importer of crude oil, thus weakening demand, according to independent analyst Tina Teng.
The dollar is heading to achieve its largest daily rise since March 2020 against its major counterparts amid the launch of so-called “trades betting on Trump’s policy.”
A stronger dollar makes commodities in which it is denominated – such as oil – more expensive for holders of other currencies.
Giovanni Staunovo, an analyst at UBS, told Reuters: “A Trump presidency may lead to a slowdown in the economy. Imposing tariffs on imported goods could harm global economic growth and lead to a decline in demand for oil.”
He added, “However, Trump may impose new sanctions on Iran and Venezuela, which will reduce oil supplies from these two countries to global markets, which will benefit (oil prices).” Iran exports about 1.3 million barrels per day.
“If Trump wins, he will not pay much attention to renewable energy and will actively encourage the growth of US oil production,” said Ashley Quilty, an analyst at Panmure Liberim.
She added, “This is not good for OPEC+, which will have to decide whether it wants to protect its market share or try to maintain price levels.”
Priyanka Sachdeva, senior market analyst at Philip Nova, said in a note that signs of weak demand also affected oil on Wednesday, after data from the American Petroleum Institute showed that US crude inventories grew more than expected.
Market sources quoted figures from the American Petroleum Institute that US crude oil inventories rose by 3.13 million barrels in the week ending November 1, which exceeds an increase of 1.1 million barrels expected by a Reuters poll.
Meanwhile, oil and gas producers in the US Gulf of Mexico have begun halting production with Tropical Storm Rafael expected to become a Category 1 hurricane by Wednesday morning.
