Crude prices drop as dollar strengthens

• Published On: 07 November 2024 at 18:49

Oil prices fell further on Thursday, aided by a stronger dollar and lower crude imports from China, which outweighed potential supply disruptions caused by Donald Trump's presidential victory and output cuts from Hurricane Rafael.

Initially, Trump's election triggered a sell-off, sending oil prices down more than $2 as the dollar rose.

However, prices recovered slightly, closing Wednesday's session with a loss of less than 1%, according to Reuters.

Brent crude futures fell 48 cents, or 0.6%, to $74.44 per barrel on Thursday morning, while U.S. West Texas Intermediate crude fell 61 cents, or 0.9%, to $71.08.

Ole Hansen, an analyst at Saxo Bank, noted that downside pressures are coming from a strong dollar and sluggish demand, while upside risks are linked to the possibility of increased sanctions on Iran and Venezuela under Trump, as well as ongoing Middle East conflicts.

"Some of these potential drivers will have no impact in the foreseeable future, but they all contribute to the current narrative of rangebound trading."

"Absent any major geopolitical escalation, the short-term outlook leans toward downside risk in my opinion," he told investors.

The dollar remained near four-month highs on Thursday, as investors awaited key central bank decisions, including those from the United States Federal Reserve. A stronger dollar makes oil more expensive for holders of other currencies, typically pushing down oil prices.

"Historically, Trump's policies have been pro-business, which likely supports overall economic growth and increases demand for fuel," said Phillip Nova's senior market analyst, Priyanka Sachdeva. "However, any interference in the Fed's easing policies could lead to further challenges for the oil market."

Additional downward pressure on oil prices came from data showing a 9% drop in China's crude oil imports in October, the sixth consecutive month of year-on-year declines. This was exacerbated by a rise in US crude inventories.

According to Energy Aspects, Trump is expected to reinstate his "maximum pressure" sanctions on Iranian oil exports, potentially reducing supply by up to 1 million barrels per day (bpd).

During his first term, Trump also imposed tougher sanctions on Venezuelan oil, which were temporarily lifted under the Biden administration before being reinstated.