Oil markets saw significant fluctuations on Wednesday, with Brent crude for January delivery initially falling to $73.53 per barrel at 8:40 AM ET. However, the price rebounded to $75.91 per barrel by 11:00 AM ET after Donald Trump won the U.S. presidential election, defeating Kamala Harris.
Concerns have emerged on Wall Street regarding how Trump’s potential leadership could affect the world’s largest crude producer. Trump has promised to boost U.S. energy independence by increasing oil and gas production, raising fears that this could disrupt global supply.
Citi recently forecasted that a second Trump presidency might be “net bearish” for oil prices. The bank cited factors like trade tariffs, oil-friendly policies, deregulation, and Trump’s likely push for OPEC+ to release more oil onto the market.
Meanwhile, experts at Standard Chartered have stated that OPEC+ actions are expected to play a key role in shaping short- and mid-term oil prices. According to StanChart, much of the recent negative sentiment in the oil market is due to misconceptions about OPEC+’s tapering mechanism for voluntary production cuts. Some traders fear that rising production from OPEC+ countries could lead to an oversupply, especially if global oil demand and non-OPEC+ supply growth fail to keep pace.
However, Standard Chartered argues that these concerns are misplaced. The bank highlights that OPEC+ has repeatedly emphasized that any production increases will depend on market conditions, not an automatic return to full output levels. Traders have been fixated on how many barrels could be reintroduced to the market before a surplus occurs, but price movements suggest that the answer is “zero” for now.
In a November 3 press release, OPEC announced that it would delay any output increases until January 2025. Standard Chartered believes this delay does not signal that OPEC+ doubts the market’s ability to absorb more oil. Instead, it reflects a cautious approach, acknowledging overly pessimistic forecasts for the 2025 oil balance. The announcement has bolstered the argument that OPEC+ will tailor its tapering strategy to market conditions, easing concerns that the oil supply would increase too quickly.
The latest developments have contributed to a rally in oil prices, as traders adjust to the idea that OPEC+ will act cautiously in managing production.
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