Oil Prices Rise Amid Post-Election Volatility and Hurricane Concerns

Oil Prices Climb Amid Concerns Over Trump Presidency and Gulf Coast Hurricane

Oil prices edged higher on Thursday, reversing some of the losses from a post-election sell-off. Traders weighed potential supply disruptions due to both Donald Trump’s presidential win, which may affect oil sanctions, and the intensifying Hurricane Rafael approaching the Gulf Coast.

As of 0400 GMT, Brent crude futures had gained 65 cents, or 0.87%, reaching $75.57 per barrel, while US West Texas Intermediate (WTI) crude rose by 54 cents, or 0.75%, to $72.23 per barrel.

Market analyst Tony Sycamore of IG highlighted that concerns around potential supply constraints from renewed US sanctions on Iran and Venezuela, coupled with the looming hurricane, offset the impact of a stronger US dollar and an increase in US crude inventories. Trump’s return to office may lead to a “maximum pressure” strategy on Iran, potentially reducing oil supply by up to one million barrels per day, as estimated by Energy Aspects.

The dollar’s strength, reaching its highest point since September 2022, initially spurred a sell-off that saw oil prices drop by over $2 per barrel. However, by the end of Wednesday, front-month contracts had recouped some losses, closing 61 cents down for Brent and 30 cents down for WTI.

Phillip Nova’s senior market analyst Priyanka Sachdeva noted that while Trump’s pro-business stance could support economic growth and increase fuel demand, any interference in the Federal Reserve’s policies could create new challenges for the oil sector. “With the dollar surge near a four-month high, oil faces significant headwinds post-election,” she added.

Supply concerns may be alleviated in the near term with OPEC’s anticipated production increase in January. Analysts suggest that sanctions may not deter major buyers like India and China from purchasing oil from Iran or Russia. Additionally, the impact of the Gulf storm was already visible as Hurricane Rafael intensified to a category 3, leading to a halt of 17% of crude production, or 304,418 barrels per day, according to the US Bureau of Safety and Environmental Enforcement.

US crude stockpiles rose by 2.1 million barrels last week, totaling 427.7 million barrels as reported by the US Energy Information Administration, surpassing the anticipated 1.1 million-barrel increase.

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