Crude oil prices fell by 2.5% on Wednesday, November 6, ending a five-day rally. The decline was driven by a stronger US dollar, with reports suggesting that Republican candidate Donald Trump is gaining momentum in the race for a second term in the White House.
A stronger dollar typically weighs on oil prices by making crude more expensive for buyers using other currencies. Brent crude futures dropped to $73.64 per barrel, down from the previous close of $75.53. Similarly, West Texas Intermediate (WTI) crude futures fell to around $70.22, a 2.45% decline from the prior close of $71.99.
Crude prices have been volatile in recent weeks, influenced by various factors. These include OPEC+’s decision to delay its December production plans for the second time, ongoing tensions in the Middle East, an upcoming decision by the US Federal Reserve on interest rates, and signs of economic recovery in China, the world’s largest oil importer.
Rahul Kalantri, Vice President of Commodities at Mehta Equities, explained, “Crude oil prices saw sharp fluctuations last week, bouncing back from earlier lows due to a drop in US oil inventories and heightened geopolitical risks. US crude stocks fell by 0.5 million barrels, defying expectations of a 1.5-million-barrel increase and coming in far lower than the previous week’s surplus of 5.5 million barrels.”
He added that the price rebound was further supported by geopolitical unrest in the Middle East and the potential delay in production hikes by OPEC+ nations. However, these gains were capped by the strength of the US dollar and weak economic data from Europe.
US Dollar Index Hits 4-Month High Amid Trump’s Election Surge
The US Dollar Index, which tracks the dollar’s performance against a basket of six major currencies, surged by 1.9% to 105.30 on Wednesday. This marked its highest level in nearly four months, fueled by increasing speculation that Donald Trump could secure a second term in the US presidential election.
Earlier, the Dollar Index had come under pressure when polls showed rising support for the Democratic nominee, Vice President Kamala Harris, in key battleground states. This led investors to scale back their bets on a Trump victory. However, as it became clear that Trump was gaining ground in several key swing states, the Dollar Index sharply rebounded.
According to the Associated Press, Trump has already won the critical state of Pennsylvania, leaving him just three electoral votes short of victory. With 267 electoral votes, Trump now needs to win Alaska or any of the remaining battleground states — including Michigan, Wisconsin, Arizona, or Nevada — to reclaim the White House.
Trump’s victory in Pennsylvania, once a stronghold for Democrats, mirrors his 2016 win in the state. He also secured Georgia, a state that had voted for Democrats four years ago, and held onto North Carolina, another closely contested state.
Impact of Trump’s Policies on the Dollar and Inflation
Analysts believe that Trump’s proposed policies — including tighter immigration, tax cuts, and significant tariffs — could put more upward pressure on inflation and bond yields than the center-left policies of Kamala Harris. These proposals are also likely to drive up the dollar, potentially limiting the extent to which US interest rates can be reduced in the future.
As the US election race intensifies, the dollar’s strength is expected to continue influencing oil prices, with ongoing geopolitical risks and market uncertainty keeping crude prices volatile.
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