Oil Prices Drop Over 1% as Donald Trump Victory Spurs Strong Dollar

A stronger dollar has pushed oil prices down over 1% as global demand weakens.

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RALEIGH, NORTH CAROLINA - NOVEMBER 04: Republican presidential nominee, former U.S. President Donald Trump takes the stage during a campaign rally at the J.S. Dorton Arena on November 04, 2024 in Raleigh, North Carolina. With one day left before the general election, Trump is campaigning for re-election in the battleground states of North Carolina, Pennsylvania and Michigan. Chip Somodevilla/Getty Images

On Wednesday, the re-election of Donald Trump was not the only reality that came from expert projection, especially as the US dollar strengthened once more following investor confidence.

Because dollar prices affect commodities, oil prices also dropped over 1%, especially since it's traded in dollars.

According to Reuters, a stronger dollar makes oil more expensive for buyers using other currencies, reducing demand. In particular, both Brent crude and US West Texas Intermediate fell by $1.04, or $74.49 and $70.95 per barrel, respectively.

With proposed higher tariffs, Trump's policies could further impact oil prices by pressuring the Chinese economy, which is a major importer of crude oil. Analysts explained that these tariffs can also reduce China's economic growth, which can decrease demand for oil. For now, oil prices could remain low with the dollar further strengthening ahead.

The last time the dollar had its highest single-day increase was in March 2020.

Trump Re-election's Impact on the Oil Industry

Some economists, regardless, believe that the reduced oil prices will hurt global economic growth due to a decline in demand. In fact, analysts also noted that tariffs and other restrictive trade policies will slow economic activity. But at the same time, renewed sanctions to be imposed on Iran and Venezuela will support oil prices by limiting the amount of oil in the market.

Both possibilities will be a mix of chaos and good during Trump's presidency next year.

Industries told S&P Global that Trump's energy policies can actually support US oil production rather than renewables. This could force OPEC+ members to choose between maintaining market share or stabilizing prices since more US oil output means lower global oil prices.

Currently, with Trump's recent win, the long-term outlook for the oil industry is still shaky. For the short term, however, US oil output will be momentarily put on hold since the US Gulf of Mexico and other oil and gas producers started shutting down operations in anticipation of Tropical Storm Rafael, which is expected to become a hurricane.

Tags
Donald Trump, U.S. dollar, Oil price

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