In a word to shoppers on Thursday, Citi strategists assessed the affect the upcoming 2024 U.S. presidential election, seemingly between Donald Trump and Kamala Harris, might have on oil costs.
The strategists emphasised that underneath the Trump administration, “the affect on the oil market is prone to be a web unfavorable as a result of commerce tariffs, oil and gas-friendly insurance policies/deregulation, and the push for OPEC+ to launch oil into the market.”
Then again, Citi sees the potential for tightening sanctions on Iran underneath Trump as a major bullish issue, though even that might have a restricted affect.
Trump’s historical past with Iran means that reimposing sanctions might take away massive quantities of Iranian oil from the market, pushing up costs.
Harris’ vitality coverage, alternatively, is anticipated to be intently aligned with that of the present Biden administration, which might preserve or barely improve regulatory strain on the oil business.
Harris’ method to Iran is prone to be much less confrontational, sustaining the established order relatively than reimposing powerful sanctions. Her administration is prone to proceed to help diplomatic approaches to scale back the chance of great disruptions to Iran’s oil exports.
As well as, Harris might turn out to be extra supportive of a ceasefire within the Center East, which can additionally improve the steadiness of the area and its oil provide dynamics.
On the similar time, Trump’s environmental insurance policies might also play a job. Citigroup mentioned the administration might roll again environmental rules and halt aggressive Democratic gasoline economic system requirements.
Trump’s stance in opposition to electrical automobile (EV) subsidies might gradual EV adoption, sustaining greater demand for oil. Nonetheless, Elon Musk’s latest help for Trump “might mitigate that affect,” strategists mentioned.
As an alternative, a Harris administration is anticipated to keep up or barely strengthen the present administration’s regulatory method.
“Harris’ vitality coverage will not look a lot totally different than that of the present administration,” the strategist famous.
This contains supporting renewable vitality plans and sustaining tighter rules on fossil gasoline manufacturing.
The potential affect on oil costs additionally extends to infrastructure and regulatory measures. Below Trump, there could also be efforts to extend leasing and land auctions for oil manufacturing, notably on federal lands. That is prone to improve home provide, however its fast affect is prone to be restricted as a result of wider market circumstances and the legislative course of required to implement main modifications.
Harris, alternatively, is prone to push for stricter rules underneath the Clear Air Act and Clear Water Act, though these rules might face authorized challenges. Her authorities might also plan to part out new inner combustion engine automotive gross sales in 2035, “though this may once more be challenged within the courts,” the strategist mentioned.
Citi mentioned that from a geopolitical perspective, Trump’s shut relationship with Saudi Arabia might result in elevated oil provide from OPEC+, probably decreasing costs. Likewise, Trump additionally talked about negotiating a deal to finish the battle between Russia and Ukraine. If profitable, it might additionally ease strain on oil and gasoline markets.
