Oil News: Trump Victory Spurs Dollar Surge, Weighing on Crude Outlook

Oil Prices Slip as Dollar Gains on Trump Victory

Oil futures are trending lower on Wednesday, pressured by a surging dollar after Donald Trump’s presidential election win. The market remains rangebound, trading between a major retracement zone of $69.21 to $71.63, reflecting mixed technical and geopolitical signals.

With resistance near the 200-day moving average at $73.15 and support around the 50-day moving average at $69.98, crude prices are struggling for direction. Traders now await further clarity on U.S. policy shifts, which could reshape the global oil landscape.

At 12:32 GMT, Light Crude Oil Futures are trading $70.91, down $1.08 or -1.50%.

Stronger Dollar Adds Pressure to Oil Prices

Trump’s victory has fueled a significant rally in the dollar, marking its biggest one-day gain since March 2020. Market sentiment is shaping expectations that his administration may push policies that drive interest rates higher, in part to manage potential inflation stemming from trade tariffs or fiscal expansion. The stronger dollar, in turn, makes dollar-denominated commodities like oil more expensive for buyers using other currencies, curbing demand.

Analysts suggest that China could feel pressure from these potential trade barriers, reducing demand for oil in the world’s largest crude-importing nation. Independent analyst Tina Teng noted that this dollar-driven demand hit is a headwind for oil prices, while UBS analyst Giovanni Staunovo emphasized that tariffs and trade challenges under Trump could weigh heavily on global oil demand.

Potential Sanctions Pose Upside Risks

Although Trump’s policies present demand risks, his administration could also revive sanctions on key oil producers, which would restrict global supply. Renewed sanctions on Iran and Venezuela could remove as much as 1.3 million barrels per day from global markets, which would tighten supply and support oil prices. “This policy shift would be bullish for oil by reducing available supply from these regions,” Staunovo commented.

Additionally, Trump’s favorable stance on U.S. oil production might increase domestic output. Panmure Liberum analyst Ashley Kelty remarked that a surge in U.S. production would challenge OPEC+ efforts to support prices, pushing the cartel to choose between protecting market share or sustaining output cuts.

Rising U.S. Inventories Signal Softer Demand

Demand worries are also heightened by a larger-than-expected rise in U.S. crude inventories. American Petroleum Institute (API) data showed an increase of 3.13 million barrels for the week ending November 1, significantly above the forecasted 1.1 million barrels. Priyanka Sachdeva, senior analyst at Phillip Nova, said that rising inventories combined with potential demand headwinds signal softer market conditions for crude.

Meanwhile, the market is monitoring potential supply disruptions as oil producers in the U.S. Gulf of Mexico halt operations, with Tropical Storm Rafael forecast to intensify. Still, near-term demand concerns seem to outweigh these temporary supply risks.

Market Forecast: Bearish Short-Term Outlook for Oil Prices

Considering the impact of a stronger dollar, weakening demand prospects, and rising U.S. inventories, the short-term outlook for oil prices remains bearish. Though sanctions on Iran or Venezuela could limit supply and provide a floor to prices, broader demand challenges are likely to weigh on oil. Traders should expect prices to remain under pressure, with resistance at $73.15 and limited support above $69 unless clear supply cuts materialize.