When the dust settles, and after the US Presidential Election 2024 next week and all the votes have been counted, the oil market might adopt a watch and wait approach.
It is difficult to say with certainty whether Donald Trump’s second term as president would have a better impact on the oil market than Kamala Harris.
The energy market has been kept on its toes by the divergent opinions of both candidates on fossil fuels and climate.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said that it was not easy to answer the question about which candidate would perform better on the oil markets.
Fritsch added:
Trump’s support for oil is viewed as better because he will reduce environmental regulations. Harris is more likely to keep the regulations.
Kamala Harris’s position on fracking could sway swing state voters
Different opinions exist on whether or not Vice President Harris will also impose restrictions on fracking.
The Joe Biden Administration prioritised the support of renewable energys and tightened regulations on oil companies.
Biden was President when a drilling ban on federal land was implemented.
Harris had stated in 2019, that she wished to ban the practice of fracking. However, her position changed when she was appointed as Vice President Biden. She is currently in favor of fracking and wouldn’t ban it as president.
Commerzbank says that the position on fracking may be crucial, as Pennsylvania is one of the swing states this year. It has the biggest shale-gas deposit in the US.
Donald Trump is in favor of drilling
Trump also said he plans to expand fracking on federal land.
Trump famously declared during the Republican National Convention that “we will drill baby, drill” (we’ll drill).
The Fracking technology involves injecting liquid into drilled wells to extract gas or oil.
ICD reported that there is a “definitely a push” towards cleaner fuels, and electric vehicles (EVs), with the current Administration. A Harris victory would continue these policies, Rohit Rathod said, senior analyst at Vortexa. Vortexa provides real-time tracking of energy cargo and analysis of freight markets.
Rathod is a noted note:
It won’t be a major push against oil exploration but it will continue some existing policies, such as the ban on permits for drilling on federal land. It’s a ploy to win over their voters, as most drilling on the Permian Basin and other shale formations occurs on private land and has little impact on oil exploration.
Sanctions: Policy
Biden reinstated the Paris Agreement on the first day of his presidency, while Trump retracted from it. Trump also repealed more than 100 regulations relating to the environment during his tenure as president between 2017 and 2020.
Paris Agreement (Paris Agreement) is an international legally-binding treaty, which aims at reducing greenhouse gas emissions as well as adapting to climate change.
Trump reinstated the sanctions against Iran following his withdrawal from the deal, which resulted in a substantial decline in Iran’s oil production under his presidency.
Iran’s oil production will have halved by 2020 to 2 million barrels a day.
Iran’s oil production has reached its highest levels since the fall of 2018, despite sanctions remaining in place. Fritsch, a Commerzbank analyst said: “It appears that the Biden Administration hasn’t enforced the sanctions with enough vigor.”
Experts say that if Harris wins she will likely continue the Biden administration approach on sanctions with more sanctions focused specifically on Russia.
Russia sanctions: Trump suggests easing of the restrictions in exchange for a peace agreement
Trump could also ease the sanctions against Moscow as part of a deal to bring peace with Russia and Ukraine. Trump is likely to reimpose sanctions against Iran, and limit their production.
Trump could also oppose sending US troops into Ukraine.
Fritsch said:
China is the biggest buyer of Iranian Oil. Strict implementation of Iran sanctions could lead to a confrontation. Trump would be more inclined to take this step than Harris.
Rathod stated that “Trump said that he wanted to end the Russia Ukraine Conflict, but if this means that he would ease sanctions against Russia remains to be determined.”
Experts say that having control over the Congress is key in making important decisions, if Trump becomes president for a second term.
He has made a number of promises, including the control of illegal immigration and tax breaks. Most likely, he won’t have the time to deal with all of his promises immediately. Rathod said that the control over the congress, which currently belongs to the Democrats, will be crucial for him in order to fulfill his promises.
Oil market volatility may be caused by Trump’s changes in foreign policy
Oil prices could briefly increase if the results of next week’s elections are uncertain.
ICD reported that Vandana, CEO and founder of Singapore’s Vanda Insights said: “I don’t anticipate any lasting impact on crude prices after the results.
The oil prices are dominated by a price range of $70-$80 a barrel, with extreme fluctuations.
Hari stated that it could take some time for any policy changes, whether beneficial or harmful to the US upstream energy industry to affect production and prices.
If Trump were to win the election, his plan to drill more oil would add to an already abundant supply of crude oil on the market.
Fritsch, a Commerzbank analyst, said that this would only be true if oil supplies from Iran didn’t also decline due to the stricter sanctions.
If this scenario occurs, the Organization of the Petroleum Exporting Countries (OPEC) and its allies would face a much greater challenge to balance the market.
OPEC+ will increase its oil production in December, by reversing a few of the voluntary cuts.
Fritsch stated that OPEC+ must therefore hope Harris is elected.
Hari added
It is also important to watch how the new president will influence the Ukraine and Gaza Wars. This too, is a long-term impact, so the market is better off waiting to see what happens before making any bets about oil prices, whether they are bullish or negative.
The post US Election spotlight: Donald Trump vs Kamala Harri clash over energy and climate policy may change as new developments unfold
