Oil Prices Decline as Markets Await U.S Election Results
Prices of crude oil declined on Wednesday as markets await the official results of the United States (U.S.) election. Brent crude declined to $74.25 per barrel amidst demand uncertainties. The US benchmark West Texas Intermediate also fell by 1.6% to $70.65.
The American Petroleum Institute (API) reported late Tuesday that US commercial crude oil inventories increased by 3.13 million barrels, surpassing market expectations of a 1.80 million barrel rise.
The build in crude reserves reflected market perceptions of weakening domestic demand, supporting downward price movements. Official figures from the Energy Information Administration (EIA) are scheduled for later in the day. If a rise in crude oil inventories is confirmed, prices are likely to fall further.
Market players are focused on the results of the US presidential elections. According to initial poll results, Republican candidate Donald Trump is leading the race against Democratic candidate Kamala Harris.
Experts believe that there will be changes in policies in the US economy depending on the election results, which will also affect commodity prices.
If Trump takes office for the second time, he is expected to impose new tariffs, especially on Chinese goods, reduce taxes and increase fossil fuel production.
The rise of the US dollar against other currencies aided the decline in oil prices. The US dollar index increased by 1.81% to 105.189. The strong dollar is expected to reduce demand by making oil more expensive for foreign currency users.
In addition, investors also await Thursday’s monetary policy decisions from the US Federal Reserve (Fed) for further clues about the country’s future economic trend.
Oil prices have held relatively steady as markets await the outcome of the US election, in what is expected to be a very close race.
ICE Brent settled above $75/bbl yesterday with a weaker USD likely supporting the market. Oil will likely be vulnerable to broader moves as markets get more clarity on how the US election plays out.
For oil fundamentals, a Trump victory could provide some short-term upside with the risk of stricter sanction enforcement against Iran, ING commodities strategists said in a note.
However, in the medium to longer term, analysts noted that a Trump victory could be more bearish for oil due to trade and foreign policy. Meanwhile, a Harris victory would likely keep the status quo.
In addition to a weaker USD, a decision by OPEC+ members to delay their gradual increase in supply by one month will also support prices, along with the potential for supply disruptions in the US Gulf of Mexico due to Tropical Storm Rafael.
