Global oil prices experienced gains this week as market watchers brace for potential U.S. policy shifts following the recent election. Analysts forecast that the anticipated return of Donald Trump to the White House could lead to tighter sanctions on Iran, a move that may impact the supply of Iranian oil and support further price increases.
Iran’s oil exports saw a decline in October, as shipments slowed amid heightened geopolitical tensions. Tehran held off on loading additional cargoes following a missile strike, awaiting possible repercussions from Israel. Analysts predict that Trump’s election could exacerbate the situation, potentially reducing Iranian oil sales further through stricter sanctions.
On Friday, Brent crude, the international oil benchmark, rose to $74.66 per barrel, up from $72.84 the previous week. U.S. West Texas Intermediate (WTI) also saw gains, trading at $71.07 per barrel, compared to $69.10 last week. The price increases reflect ongoing support from the recent decision by the OPEC+ coalition to extend production cuts.
OPEC+, comprising the Organization of the Petroleum Exporting Countries and allied producers, announced on November 3 a commitment to continue production cuts of 2.2 million barrels per day until December. The group had initially planned to increase production by 180,000 barrels per day but opted to delay this increase, reinforcing a tighter supply outlook and contributing to upward price momentum.
The oil market also experienced pressure from a stronger U.S. dollar as election results became clear, but prices recovered by the end of the trading week. Analysts from ING noted that the potential return of a Trump administration introduces a mix of forces, including possible increased oil and gas leasing on federal lands, which had been significantly reduced under the Biden administration. However, ING strategists caution that Trump’s policies could also signal a more aggressive stance toward Iran, potentially affecting over 1 million barrels per day of supply.
Gulf of Mexico Output Hit by Hurricane Rafael
In addition to geopolitical developments, weather disruptions further tightened oil supply as Hurricane Rafael impacted production in the Gulf of Mexico. The Bureau of Safety and Environmental Enforcement (BSEE) reported that more than 304,000 barrels per day of oil production were shut in due to the hurricane, along with 131 million cubic feet per day of natural gas production.
U.S. and Chinese Economic Indicators Show Mixed Signals
In the United States, the Energy Information Administration (EIA) released its weekly crude inventory report, showing an increase of 2.15 million barrels in commercial crude stocks. Although this was less than the 3.1-million-barrel rise reported by the American Petroleum Institute (API) earlier, it still suggests a build-up in domestic inventories.
Meanwhile, China’s crude oil imports fell in October to 10.56 million barrels per day, marking a 4.9% decline month-on-month and an 8.7% decrease year-on-year. Cumulative imports are down by 3.4% for the year, heightening concerns about softening Chinese demand amid broader global economic uncertainties.
U.S. Federal Reserve Lowers Interest Rates
In a separate development, the U.S. Federal Reserve announced a 25-basis-point rate cut this week, setting the target range between 4.5% and 4.75%. This marks the Fed’s second rate cut in four years, following a 50-basis-point reduction in September. Fed Chair Jerome Powell indicated that the election outcome would not affect near-term policy decisions, maintaining a focus on economic stability as the bank continues to navigate post-pandemic recovery.
With a combination of supply cuts, geopolitical uncertainties, and mixed economic signals, oil prices remain sensitive to emerging developments, with analysts closely monitoring shifts in U.S. policy and global market dynamics as key drivers for the energy sector’s future trajectory.
