Oil prices limited their losses after a drop on Wednesday caused by the impressive rise of the dollar after the election of Donald Trump. The price of a barrel of Brent from the North Sea for delivery in January lost 0.81% to $74.92. Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in December, dropped 0.42%, to $71.69. Earlier in the day, Brent and WTI had slipped to $73.34 and $69.74, respectively. “When it became clear that Donald Trump was going to become the next president of the United States, oil prices initially fell, in part because the dollar exploded”commented to AFP Phil Flynn, of Price Futures Group.
The greenback soared following the election of the Republican candidate, recording multi-month highs against many currencies. As oil is exchanged in dollars, an appreciation of the greenback increases the oil bill. Furthermore, the Republican candidate, favorable to fossil fuels, promised during his campaign to “drill at all costs”. “This mantra (…) leads stakeholders to think that we will see lower prices”analyzed Mr. Flynn. “People who were betting on a Kamala Harris victory – which would have led to higher prices – therefore had to reconsider their position”he added.
Nevertheless, the market kept an eye on “geopolitical risks” linked to the arrival of the Republican candidate at the White House, according to the analyst. The return to power of Donald Trump is a new factor of uncertainty in the conflict in the Middle East, which raises many fears about supplies from the region. Under the presidency of Donald Trump, “the United States could let Israel be more aggressive with Iran”one of the ten largest oil producers, assumes Ole Hvalbye of SEB. At the same time, the American Energy Information Agency (EIA) announced an increase in American crude stocks (+2.1 million barrels) last week, which may have contributed to the downward movement in prices.
