Global oil prices fell as much as 2% on Wednesday after two sessions of gains, as the dollar surged on projections that Republican Donald Trump had won the U.S. presidential election, and as U.S. crude stocks rose more than forecast.
Brent crude oil futures was down $1.17, or 1.5%, to trade at $74.36 per barrel at 0710 GMT, while U.S. West Texas Intermediate (WTI) crude lost $1.11, or 1.5%, to trade at $70.88 per barrel.
Besides the surging dollar weighing on commodity prices, including oil, a Trump presidency could see policies that may further pressure the Chinese economy, hence weakening demand, said independent analyst Tina Teng, as China is the world’s top importer of crude oil.
Fox News projected that Trump won the U.S. presidency, defeating Democrat Kamala Harris in a stunning political comeback four years after he left the White House. Other media outlets have yet to call the race.
The dollar was set for its biggest one-day rise since March 2020 against major peers as so-called “Trump trades” took off.
A stronger U.S. dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies, in turn curbing demand.
“If Trump wins, it is bullish for the oil market in the short-term due to prospects of tighter sanctions on Iranian oil,” said Soni Kumari, commodity strategist at ANZ Research.
In the longer-term, however, it could be bearish as Trump’s policies will be supportive for the U.S. oil and gas industry, while trade protectionism may result in weaker demand, she added.
Additionally, weakening demand signals also weighed on oil prices on Wednesday, said Phillip Nova senior market analyst Priyanka Sachdeva in a note, after data from the American Petroleum Institute data showed that U.S. crude inventories grew more than forecast.
U.S. crude oil stocks rose by 3.13 million barrels in the week ended Nov. 1, market sources said, citing American Petroleum Institute figures, higher than a 1.1 million barrels build-up projected in a Reuters poll.
Gasoline inventories fell by 928,000 barrels, largely in line with the poll, and distillate stocks fell by 852,000 barrels, according to the sources.
Meanwhile, oil and gas producers in the U.S. Gulf of Mexico began shutting output and pulling workers off ahead of a late hurricane season storm threatening offshore fields, as Tropical Storm Rafael is forecast to became a Category 1 hurricane by early Wednesday.
