Some major Wall Street banks believe that oil prices could fall if former US President Trump wins the election.
Goldman Sachs Group Inc. and Citigroup Inc. said in separate reports that while the Republican candidate's promise to increase the country's crude oil production may not be realized, the trade tariffs imposed by Trump may be bearish for oil prices.
Oil prices could fall by $11 to $19 a barrel next year if tariffs significantly hurt the global economy, a team led by Goldman Sachs analyst Daan Struyven wrote. They said Trump’s return to the White House would present “downside risks” to the expected range of $75 to $90 a barrel for crude.
The bank's economists examined a scenario in which Trump imposed a 10% across-the-board tariff on all goods imports, triggering retaliatory tariffs of the same magnitude from other countries.
“The Trump administration is mostly bearish,” Citigroup analysts including Eric Lee wrote, noting Trump’s “trade, oil and gas policies” and his influence on the OPEC+ alliance of producers.
The two banks added that it could also push oil prices higher if Trump resumes his previous crackdown on Iranian exports. The former US president used a "maximum pressure" strategy in his failed attempt to renegotiate the nuclear deal with Tehran.
Goldman Sachs predicts that Iran's production could fall by about 1 million barrels per day, or almost a third of its output, during a second Trump term. However, other producers in OPEC+ will likely try to fill the gap, limiting price increases to about $9 a barrel.
Despite Trump's vow to increase U.S. oil production, the banks do not expect that to have a material impact on output, which is already at record levels.
The most likely options for a Trump administration include increasing leasing and land auctions and lifting a ban on leasing in the National Petroleum Reserve in Alaska, according to Citigroup.
“While Trump appears to have a more oil and gas-friendly agenda than the Democratic candidates, his impact on physical oil markets is likely to be limited,” the bank said. “Broader market conditions are more constraining U.S. oil and gas production growth than regulatory factors.”
Earlier this year, Citigroup Inc. predicted that a Trump victory would bolster the bank’s confidence that oil prices would fall to $60 a barrel by 2025. Conversely, analysts at Sanford C. Bernstein Inc. predicted in January that oil prices could strengthen if the Trump administration squeezes Iranian oil exports.
The article is forwarded from: Jinshi Data
