Oil Advances as Trump Seen Pursuing Business-Friendly Policies

  • WTI futures climb 0.6%, recouping initial decline of 4.3%
  • U.S. crude stockpiles rise 2.4 million barrels last week: EIA

Oil climbed as global markets weighed the implications of Republican Donald Trump’s election as the 45th U.S. president.

Futures rose 0.6 percent in New York after falling as much as 4.3 percent earlier. U.S. equities gained amid speculation Donald Trump and a Republican-controlled Congress will pursue business-friendly policies. The knee-jerk selloff of risky assets began to abate as Trump, 70, promised to try to unite America’s divided political factions after his victory over Hillary Clinton.

"This is quite a reversal from midnight last night," said Matt Sallee, who helps manage $15 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas. "We’re still coming to grips with the implications of the election. A consensus may be forming that fiscal stimulus, lower taxes and a loose monetary policy will be good for growth."

The result nonetheless rattled markets that had banked on a continuation of economic and trade policies under a Democratic 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.

West Texas Intermediate for December delivery rose 29 cents to settle at $45.27 a barrel  on the New York Mercantile Exchange. Futures dropped as much as $1.91 to $43.07 in early trading. Total volume traded was 82 percent above the 100-day average.

Brent for January settlement climbed 32 cents, or 0.7 percent, to $46.36 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a 42-cent premium to WTI for January delivery.

Market Reversal

The S&P 500 Index climbed for a third day. The S&P Oil & Gas Exploration and Production Select Industry index, up 4.9 percent at 3:01 p.m., was set for the biggest increase since Sept. 28.

"The oil market is following stocks," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $5.2 billion. "We’re getting a relief rally pretty much on nothing. The fundamentals are not that bullish."

Trump exceeded the 270 Electoral College votes needed to become the president-elect and the Republicans also retained control of Congress. Trump has pledged to clamp down on immigration to the U.S. and renegotiate free-trade agreements with countries including Mexico.

"I don’t think President Trump will have a big impact on oil demand or output," said Mike Wittner, head of oil-market research at Societe Generale SA in New York. "He’s made statements, but we haven’t seen any thought-out policies. We will have to wait for him to get a team in place and come up with policies."

OPEC Summit

In the 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.

U.S. crude stockpiles rose 2.43 million barrels to 485 million last week, Energy Information Administration data showed Wednesday. A 2 million-barrel gain was forecast by analysts surveyed by Bloomberg, and a 4.4 million increase was reported Tuesday by the industry-funded American Petroleum Institute.

"The market is in wait-and-see mode," said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary. "We can look forward to a lot of volatility as the policies and plans of the Trump administration are formulated.

Oil 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.

"We’re going to be focused about the demand impact of the election in the short run," said Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston. "If there’s no OPEC deal prices will be under bullish pressure."

Other raw materials and the companies that produce them were whipsawed by Trump’s shock victory. Agricultural commodities declined while industrial metals rebounded from earlier losses and gold surged with haven assets.

In other oil market news:

  • Militants blew up the Forcados oil pipeline in Nigeria, Niger Delta Avengers’ spokesperson Mudoch Agbinibo wrote on Twitter.
  • Petroleos Mexicanos has hired Bank of America Corp. to help it find partners to improve operations and reconfigure its ailing refineries, said people with knowledge of the situation.
  • Energy Transfer Equity LP surged the most since April, leading oil and gas pipeline operators, on speculation that its controversial Dakota Access crude pipeline will face fewer obstacles under a Trump administration.

— With assistance by Grant Smith

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