The run up to the US Presidential Election has had a huge impact on global energy and financial markets, with reports and polls suggesting heavily that Hilary Clinton would secure the win. However, this morning Donald Trump has been announced as the new President of the USA. But how have energy markets reacted to this slightly unexpected news?
Over the last few weeks, we have witnessed oil prices reaching over $53/bbl and return back to $46/bbl. Oil prices dropped as it became very uncertain exactly how the election result would impact on US oil production levels. Both Hilary Clinton and Donald Trump seemed to favour renewable energy, though Trump had an agenda to enable America to become energy independent. The recent increase in oil rigs across the USA and their shale gas drilling schemes mean that Trump’s idea could very well come into effect.
The reason why oil prices have increased, is because OPEC’s aims to reduce the global oversupply (which will be reviewed at the end of November) will eventually be put into place to decrease oil production. However, America is not involved in OPEC, and so their efforts to reduce the glut in the market could be deemed futile should America under Trump’s presidency continue to produce oil at current levels. As a result, oil prices have returned to levels seen prior to the agreement of a production freeze made by OPEC in September this year.
The impact on UK energy markets has mostly shaped gas prices, and this morning we have seen a slight increase for front month prices. Though generally, UK energy markets remain very uncertain and volatile, and mirror the reaction seen after the Brexit announcement in June this year.
As expected, the dollar has dropped in value, though reports suggest that this would have happened no matter who was elected as President. The impact on markets after the election results are expected to be only short term. At the minute, the noticeable changes in the UK energy markets today is the cold weather, and French dependency on power exports from the UK, as the nuclear power shortage continues.
The next few months as Trump settles down as President, and the decisions he will ultimately make, may have some impact on the USD, and oil prices, with indications towards a less powerful and direct impact on UK gas and power prices. However, anything could change under President Trump’s term, so there is no telling what is to come.