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Oil prices fall as Trump wins US election

By Matt Smith, Reuters
President Donald Trump addresses supporters at a rally at the Palm Beach County Convention Center in Florida Reuters/Brian Snyder
President Donald Trump addresses supporters at a rally at the Palm Beach County Convention Center in Florida

Oil prices fell on Wednesday as the US dollar rallied on Donald Trump’s election as president.

Investors believe a Trump presidency will bolster the dollar as interest rates may need to remain high to combat inflation resulting from any new tariffs and polices that may further pressure China’s economy, weakening demand there.

Brent crude oil futures were down $1.04, or 1.4 percent, at $74.49 per barrel by 11:46 GMT, while US West Texas Intermediate crude fell $1.04, or 1.4 percent, to $70.95 per barrel.

Independent analyst Tina Teng said that besides a surging dollar weighing on commodity prices, a Trump presidency could see policies that may further pressure the Chinese economy, weakening oil demand in the world’s top crude importer, said.

The dollar was set for its biggest one-day rise since March 2020 against major peers as so-called “Trump trades” took off.

A stronger US dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies.

“A Trump presidency has a bearish spin,” UBS analyst Giovanni Staunovo said. “Tariffs would be negative for economic growth and oil demand growth.”

However, Trump could renew sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, Staunovo said. Iran exports about 1.3 million barrels per day.

“In the event of a Trump victory, he has little interest in renewables and will actively encourage US oil production growth,” said Panmure Liberum analyst Ashley Kelty.

“This is not so good for Opec+ who will have to decide whether they want to protect market share or try to sustain price levels,” Kelty said.

Weakening demand signals also weighed on oil on Wednesday, said Phillip Nova senior market analyst Priyanka Sachdeva in a note, after data from the American Petroleum Institute data showed US crude inventories grew more than forecast.

US crude oil stocks rose by 3.13 million barrels in the week ended November 1, market sources said citing American Petroleum Institute figures, higher than a 1.1 million barrel build-up projected in a Reuters poll.

Meanwhile, oil and gas producers in the US Gulf of Mexico began shutting output as Tropical Storm Rafael is forecast to become a Category 1 hurricane by early Wednesday.

Market reaction to Trump victory

By Matt Smith

Gulf stock markets

Gulf stock markets reacted positively to Donald Trump’s imminent return to the White House. Dubai’s index hit a 10-year high in Wednesday trade and was up 0.4 percent at 4,616 points as of 09:30 GMT.

Saudi Arabia’s benchmark climbed 0.9 percent to 12,120 points, taking its gains over the past month to 2.8 percent. The Abu Dhabi, Qatar and Kuwait indexes were also all in positive territory.

Marwan Shurrab, head of business development at Dubai fintech xCube and a 20-year veteran of the UAE’s asset management industry, said Gulf markets were buoyed by the US presidential election producing a clear winner.

Investors had been worried the result could be disputed ahead of a vote many experts had said was too close to call, so Trump’s resounding victory has removed this uncertainty, he said.

“This clarity has given confidence for markets to continue their (positive) performance,” Shurrab said.

Dubai’s index is up nearly 14 percent in 2024.

“The main drivers are blue chips,” Shurrab said.

Dubai’s flotation of several government-run companies has spurred some privately run businesses to also complete initial public offerings and join the emirate’s bourse. This has made the market more diversified and attracted new investors, Shurrab said.

“It substantially boosted sentiment and the price movement for most blue chips,” he said. “In addition to that there’s the economic recovery – the banking sector and the real estate sector being the main drivers and also utilities and telecoms.”

Dollar

The dollar index, which tracks the greenback against a basket of six other major currencies, was up 1.3 percent as of 08:55 GMT as traders bet Trump’s presidential election victory would strengthen the US currency in the long term.

Trump has pledged to impose tariffs on Mexico and China, the United States’ top two importers. These would likely increase inflation, as would his various proposed tax cuts, and so could lead the US Federal Reserve to raise interest rates.

Higher interest rates would make the dollar a more attractive investment, markets believe, spurring Wednesday’s rally.

The euro has a 58 percent weighting on the dollar index, while the Japanese yen (14 percent), British pound (12 percent), Canadian dollar (9 percent), Swedish krona (4 percent) and Swiss franc (4 percent) are the other components.

Gold and bitcoin

Other assets also made gains on Wednesday, although gold was a notable outlier. The yellow metal fell 0.8 percent to $2,721 per ounce, extending its slight pull-back since reaching an all-time peak of $2,788 on October 30.

Nevertheless, gold remains up 32 percent in 2024. Silver slipped 1.3 percent to $32.21 per ounce, trimming its year-to-date gains to 35 percent.

Bitcoin surged to a record high of $75,388 in early Wednesday trade. As of 09:26 GMT, the cryptocurrency was up 6.3 percent at $73,765.

Yields on 10-year US treasuries surged as the likelihood of a Trump victory grew. The yield peaked at 4.47 percent early Wednesday, rising from 4.25 percent the previous evening before easing slightly to 4.42 percent as of 09:50 GMT.

Yields are inversely correlated to prices, so a rising yield indicates increasing selling pressure on the 10-year treasuries. \

The prospect of higher interest rates makes existing bonds less attractive because future bonds will likely be sold with a higher coupon, or interest rate. Higher rates also boost the attractiveness of interest-bearing savings accounts, lessening the allure of bonds.