Oil prices steady after Trump victory

Oil prices steadied today as markets recovered from their initial shock at US President-elect Donald Trump’s victory, but investors were cautious ahead of a key Organisation of the Petroleum Exporting Countries (OPEC) meeting to decide on production.

Most markets shook off post-election losses and bounced back. However, the oil market is heavily oversupplied and investors are focusing on an OPEC gathering on 30 November which may lead to output cuts.

Brent crude was up ten cents at $46.46 a barrel by 09:20 GMT. US light crude was down 10 cents at $45.17.

“If no agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher,” the International Energy Agency (IEA) said in its monthly report today.

“If the supply surplus persists in 2017 there must be some risk of prices falling back,” the IEA added.

Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, agreed.

“We are still in an oversupplied market and that is not going to change for the foreseeable future unless OPEC [agrees on] cuts.”

The market was dampened by a 2.4-million-barrel rise in US crude inventories to 485 million barrels last week, reported by the Energy Information Administration yesterday.

Meanwhile, Investors are still assessing the long-term impact of a Trump presidency on world oil supply and demand.

BMI Research said the billionaire’s expected pro-oil and gas industry policies might mean US “production of oil and gas could recover at a faster rate in 2017 as developers grow more encouraged.”

Goldman Sachs said a Trump presidency would likely result in higher investment and, in time, increased US oil output as the president-elect has said he would deregulate fossil fuel production. He has also expressed support for hydraulic fracturing, known as “fracking”.

Internationally, the bank said Trump’s threat of renewed US sanctions against OPEC member Iran would “further incentivise Iran to maximise production in the short term rather than comply [with] an OPEC freeze.”

This reinforced traders’ doubts over the ability of OPEC and other producers such as Russia to trim output to prop up prices.