* Oil, climate change, stocks, etc., are already feeling the heat of Trump’s win
* BofA Merrill Lynch: downside oil price risk has increased after Trump’s victory
* A strong dollar will be negative for oil prices
Donald Trump will assume office and be sworn in as the president of United States only on January 20, 2017. But his victory in the presidential elections against Democratic nominee Hillary Clinton has sent the world into a tailspin. From stocks and property to currencies, to oil and climate change, many sectors have already begun to feel the heat.
For the Middle East and North Africa, oil comes first before anything as it is home to most of the world’s biggest producers.
According to BofA Merrill Lynch, the corporate and investment banking division of Bank of America, downside oil price risk has increased after Trump’s victory.
In the latest Global Energy Weekly report, the bank’s research division lists three reasons why short and medium-term downside risks to oil prices have swelled after the Republican scored the majority of votes in the US election polls.
Here are three reasons why Trump becoming US President will negatively affect oil:
The dollar is likely to keep strengthening, a net negative for oil prices.
Macro US policy shifts could impact emerging markets oil demand growth negatively. This may happen via two channels: higher US rates and a reduction in trade.
US oil output surge
Micro energy policy changes may bring down production costs and help “unlock” $50 trillion in energy resources. This could lead to a surge in US domestic energy output over the next two to three years.
“After all, a Trump presidency will likely prioritise energy security of supply and affordability over environmental concerns. In our view, this means more pipelines, more drilling locations and more refinery activity in the US,” says Francisco Blanch, Commodity & Derivatives Strategist at BofA Merrill Lynch Global Research.
“Still, it is not all doom and gloom. There are also two potential eventual positives for oil prices: a more inflationary backdrop and possibly increased geopolitical risk,” adds Blanch.