Oil falls as dollar surges, investors take stock of Trump victory

By Georgina McCartney

HOUSTON (Reuters) -Oil prices slipped on Wednesday as investors weighed a strong dollar against the potential for re-elected U.S. President Donald Trump's foreign policy plans to squeeze oil supply.

Brent crude oil futures were down 33 cents, or 0.44%, at $75.20 per barrel by 11:46 a.m. EST (1654 GMT). U.S. West Texas Intermediate (WTI) crude fell by 13 cents or 0.18%, to $71.86.

Trump's re-election had triggered a large sell off during the session as the U.S. dollar was set for its biggest one-day rise since March 2020, pushing prices down by more than $2 per barrel earlier in the session.

A stronger U.S. dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies and tends to weigh on prices.

"There was an over-reaction to the election results, and that a Trump victory could have caused the U.S. industry to sort of drill itself into oblivion and cause a glut," said John Kilduff, partner at Again Capital in New York.

"But cooler heads have prevailed and this market has a lot of problems on its hands," he added, citing ongoing war in the Middle East as a supportive factor because it could weigh on supply.

Trump's re-election could also mean the renewal of sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, UBS analyst Giovanni Staunovo said.

Iran is an OPEC member with production of around 3.2 million barrels per day or 3% of global output.

Trump's support for Israeli president Benjamin Netanyahu could also lead to more instability in the Middle East, according to Andrew Lipow, president of Lipow Oil Associates. This could boost oil prices as investors price in a potential disruption to global oil supplies.

Independent (LON:IOG ) analyst Tina Teng said Trump might also pursue policies that further pressure the Chinese economy, weakening oil demand in the world's top crude importer.



U.S. crude oil, gasoline and distillate inventories rose last week, the EIA said on Wednesday.

Crude inventories climbed by 2.1 million barrels to 427.7 million barrels in the week ending Nov. 1, the EIA said, compared with analysts' expectations in a Reuters poll for a 1.1 million-barrel rise.

Source: Investing.com