In a Thursday notice to purchasers, Citi strategists assessed how the upcoming 2024 U.S. presidential election, which is able to seemingly be a battle between Donald Trump and Kamala Harris, may affect oil costs.
Underneath a Trump administration, the affect on the oil market “may very well be web bearish as a consequence of commerce tariffs, oil-and-gas-friendly insurance policies/deregulation, and pushing OPEC+ to launch oil to the market,” strategists highlighted.
On the flip facet, Citi sees the potential for elevated sanctions on Iran below Trump as a big bullish issue, although even this might have a restricted affect.
Trump’s historical past with Iran means that reimposing sanctions may take away substantial volumes of Iranian oil from the market, thereby pushing costs up.
Alternatively, Harris’s vitality insurance policies are anticipated to align intently with these of the present Biden administration, which may preserve or barely improve regulatory pressures on the oil business.
Harris’s strategy to Iran is more likely to be much less confrontational, sustaining the established order fairly than reimposing extreme sanctions. Her administration would possibly proceed to assist a diplomatic strategy, lowering the probability of serious disruptions in Iranian oil exports.
Furthermore, Harris may very well be extra supportive of a Center East ceasefire, which may additionally add to the soundness within the area and its oil provide dynamics.
In the meantime, Trump’s environmental insurance policies may additionally play a job. Citi mentioned the administration would possibly roll again environmental laws and halt aggressive Democratic gas economic system requirements.
Trump’s stance towards electrical automobile (EV) subsidies may sluggish down the adoption of EVs, sustaining larger demand for oil. Nevertheless, Elon Musk’s latest endorsement of Trump “could moderate this impact,” strategists mentioned.
Conversely, a Harris administration is predicted to keep up or barely intensify the present administration’s regulatory strategy.
“Harris’s vitality coverage wouldn’t look too totally different from these of the incumbent administration,” strategists identified.
This contains supporting renewable vitality initiatives and sustaining stricter laws on fossil gas manufacturing.
The potential impacts on oil costs additionally prolong to infrastructure and regulatory measures. Underneath Trump, there may very well be efforts to extend leasing and acreage auctions for oil manufacturing, notably on federal lands. This might enhance home provide, however the instant results is likely to be restricted as a consequence of broader market circumstances and legislative processes required to enact vital adjustments.
Alternatively, Harris would possibly push for extra stringent laws below the Clear Air Act and Clear Water Act, though these may face authorized challenges. Her administration may additionally intention to section out new inside combustion engine automobile gross sales by 2035, “though this would be again challenged by courts,” strategists remarked.
From a geopolitics perspective, Trump’s shut relationship with Saudi Arabia may result in elevated oil provide from OPEC+, probably reducing costs, In keeping with Citi. Equally, Trump has additionally talked about negotiating a deal to finish the Russia-Ukraine battle. If profitable, this might additionally probably ease the oil and fuel markets.