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Oil Slumps as Prospect of Trump Victory Roils Global Markets

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  • Oil Slumps as Prospect of Trump Victory Roils Global Markets

Oil slumped as initial results indicating Republican Donald Trump may prevail over Hillary Clinton in the race for the U.S. presidency threw global markets into turmoil.

Futures tumbled as much as 4.3 percent in New York to the lowest since September while U.S. stock index futures and Asian equities fell with the Mexican peso. Investors are fleeing riskier assets and pouring into havens such as Treasuries and gold. In addition to winning the key states of Florida and North Carolina, Trump captured Ohio, giving him a path to beating his Democrat rival.

A possible Trump win is unhinging markets that had banked on a continuation of economic and trade policies under a Democrat president. Most polls had shown Clinton ahead of Trump going into the vote and websites that took bets on the victor had put her odds of winning at 80 percent or more. Oil may fall as much as $2 with a Trump victory, Citigroup Inc. analysts wrote in a Nov. 4 report.

“Oil prices will be crushed if Trump is elected,” said Hong Sung Ki, Seoul-based commodities analyst at Samsung Futures Inc. “If he gets elected, the impact will be greater than Brexit. Market preference for havens will be much stronger, while risk assets, including oil will plunge.”

West Texas Intermediate for December delivery dropped as much as $1.91 to $43.07 a barrel on the New York Mercantile Exchange and was at $43.85 at 2:17 p.m. in Hong Kong. The contract gained 9 cents to $44.98 on Tuesday. Total volume traded was more than sevenfold the 100-day average.

Brent for January settlement dropped as much as $1.64, or 3.6 percent, to $44.40 a barrel on the London-based ICE Futures Europe exchange. The contract declined 11 cents to $46.04 on Tuesday. The global benchmark traded at a 45-cent premium to WTI for January delivery.

Trump Trade

The final results of the state by state fight for the presidency were still being tallied early Wednesday, but signs were pointing Trump’s way after he won Florida, Ohio, Iowa and North Carolina. Clinton pulled out a victory in Virginia and Colorado — two states critical to her chances — but Trump was competitive in three other states she was counting on, New Hampshire, Wisconsin and Pennsylvania.

“The market is concerned about Trump’s trade policies,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market view is that the imposing of significant import tariffs on China and Mexico and others will likely slow world growth and creates the possibility of trade wars with retaliatory action from China.”

If Trump wins, oil prices could fall $1 to $2 below $45, if gold increases along with a sell-off in U.S. equities and other risk assets, Citigroup analysts said in the report. However, a Trump victory could “push some investors to perceive additional geopolitical risk in the market, which may buttress oil prices,” the analysts wrote.

In a special report on Nov. 7, Societe Generale SA said neither election outcome would have a profound impact on oil, while analysts at Nomura Holdings Inc. said a Clinton victory combined with an OPEC deal could trigger sharp rebounds.

If Clinton wins, investors would be watching to see if she follows through on pledges to reduce water pollution and methane emissions from hydraulic fracturing. Fracking, which along with horizontal drilling unlocked hard to reach oil and gas resources from shale formations, enabled the U.S. to boost production by more than 4 million barrels a day from 2011 to 2015.

Longer term, the reaction in oil markets to the election result would likely take a back seat to questions over whether OPEC will be able to complete a deal to restrain output at its late November meeting in Vienna.

“Oil prices are in for some volatility until the dust settles,” said Tushar Tarun Bansal, director at industry consultant Ivy Global Energy in Singapore. “However, either outcome doesn’t change the immediate supply demand fundamentals in the short term. It does add to the long term uncertainty about the global markets.”

Oil has retreated below $45 a barrel following the Organization of Petroleum Exporting Countries’ failure to agree on output quotas for member countries on Oct. 28. The group must reach a consensus before finalizing its September deal to cut production. OPEC’s chief warned of prolonged market instability if there is no agreement to limit supply.

U.S. natural gas futures were also down as much as 3.3 percent in electronic trading, extending their biggest decline since July. A Trump victory would mean an 11 percent drop in power plants’ gas demand in 2030 from 2015 levels, while a Clinton win would boost demand by 5.8 percent, based on Bloomberg Intelligence estimates in September.

In other oil market news:

  • Militants below up the Forcados oil pipeline in Nigeria, Niger Delta Avengers’ spokesperson Mudoch Agbinibo wrote on Twitter.
  • U.S crude supplies rose by 4.4 million barrels last week, the American Petroleum Institute was said to report Tuesday. Government data Wednesday is forecast to show stockpiles gained 2 million barrels.
  • Energy companies led declines in Asia. Australian producer Santos Ltd. dropped 7.5 percent, the most since May. China Petroleum and Chemical Corp., the world’s biggest refiner known as Sinopec, slumped as much as 7.8 percent during intraday trading in Hong Kong.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

South Africa’s iGas, PetroSA and Strategic Fuel Fund Merge to Create South African National Petroleum Company

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The South African Department of Mineral Resources and Energy (DMRE) has announced the merger of Central Energy Fund (CEF) subsidiaries iGas, PetroSA and the Strategic Fuel Fund (SFF).

The merger will be effective from 1 April 2021 and the new company will be called the South African National Petroleum Company.

The merger, driven by the pursuit of implementing a new company that has a streamlined operating model via the development of a shared services system and a common information platform, comes a few months after cabinet approval and the confirmation that PetroSA had incurred losses of R20 billion since 2014.

Additional factors which prompted the move included the determination to strengthen PetroSA which had not had a permanent CEO in five years prior to the appointment of CEO Ishmael Poolo last and, had become majorly ungainful since its failure to secure gas for the gas-to-liquids refinery project in Mossel Bay.

While the merger deadline has been set, the portfolio committee expressed reservations to the department’s likelihood of meeting the deadline, considering the existing legislative regime, pending issues raised in the SFF and PetroSA forensic reports, as well as PetroSA’s current insolvency and liquidity challenges, the official press statement on the briefing revealed.

“South Africa’s energy sector is entering a new dawn,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With gas discoveries off the coast and the announcement of the REIPPP programme bid window 5 and 6 on the horizon, now is the most opportune time for the merger of the CEF subsidiaries. Of course, it is not an easy task and delays may be anticipated but, this move signals a real change towards a meaningful strategy that will not only be beneficial to the DMRE but to potential investors and local development as well.”

The African Energy Chamber welcomes this move and acknowledges that this is yet another step supporting the country’s determination to restarting the engines of sustainable growth and the transformation of energy policy and infrastructure.

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Crude Oil Hits $71.34 After Saudi Largest Oil Facilities Were Attacked

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Brent Crude Oil Rises to $71.34 Following Missile Attack on Saudi Largest Oil Facilities

Brent crude, against which Nigerian oil is priced, jumped to $71.34 a barrel on Monday during the Asian trading session following a report that Saudi Arabia’s largest oil facilities were attacked by missiles and drones fired on Sunday by Houthi military in Yemen.

On Monday, the Saudi energy ministry said one of the world’s largest offshore oil loading facilities at Ras Tanura was attacked and a ballistic missile targeted Saudi Aramco facilities.

One of the petroleum tank areas at the Ras Tanura Port in the Eastern Region, one of the largest oil ports in the world, was attacked this morning by a drone, coming from the sea,” the ministry said in a statement released by the official Saudi Press Agency.

It also stated that shrapnel from a ballistic missile dropped near Aramco’s residential compound in Eastern Dhahran.

Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” a ministry spokesman said in a statement on state media.

Oil price surged because the market interpreted the occurrence as supply sabotage given Saudi is the largest OPEC producer. A decline in supply is positive for the oil industry.

However, Brent crude oil pulled back to $69.49 per barrel at 12:34 pm Nigerian time because of the $1.9 trillion stimulus packed passed in the U.S.

Market experts are projecting that the stimulus will boost the United States economy and support U.S crude oil producers in the near-term, this they expect to boost crude oil production from share and disrupt OPEC strategy.

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A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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