By Adedapo Adesanya
Crude oil went up nearly one per cent on Thursday as the market considered how US President-elect Donald Trump’s policies would affect supplies.
Yesterday, Brent futures gained 71 cents or 0.95 per cent to trade at $75.63 per barrel and the US West Texas Intermediate (WTI) crude increased by 67 cents or 0.93 per cent to close at $72.36 a barrel.
Prices gained support from expectations that Trump’s incoming administration may tighten sanctions on Iran and Venezuela.
On Wednesday, the election of the Republican candidate, Mr Trump, initially triggered a sell-off that pushed oil down more than $2 as the US Dollar rallied. He will take office in the next 78 days.
A strong Dollar makes oil expensive and this typically leads to a drop in prices.
In his first term, Mr Trump put in place harsher sanctions on Iranian and Venezuelan oil, limiting supply and supporting oil prices.
However, his successor, Mr Joe Biden briefly rolled back the sanctions but he would later reinstate them.
Such a move would raise the cost of China’s imports, piling pressure on a refining sector grappling with weak fuel demand and tight margins.
However, China and Iran have built a trading system that uses mostly Chinese Yuan and a network of middlemen, avoiding the Dollar and exposure to US regulators, making sanctions enforcement tough.
However, analysts say that the US government has been reluctant to take steps that would remove supply from the global market as a result of the Russia-Ukraine war.
Also supporting prices, the US Federal Reserve cut interest rates by a quarter of a percentage point at the close of its policy meeting on Thursday.
The US Federal Reserve said it will continue assessing data to determine the pace and destination of interest rates as officials reset tight monetary policy to account for inflation that has slowed markedly in the past year and is nearing the US central bank’s 2 per cent target.
Interest rate cuts typically boost economic activity and energy demand.
Support also came as some companies cut supply in the US due to Hurricane Rafael. According to the US Bureau of Safety and Environmental Enforcement (BSEE), over 22 per cent equivalent to 391,214 barrels per day, of crude oil production was shut in response to the hurricane.
