Wall Street says a Trump Presidency could send oil prices lower

A US election victory for former president Donald Trump could send oil prices lower, according to some prominent Wall Street banks.

While the Republican nominee’s pledges to bolster the nation’s crude production are unlikely to be fulfilled, his imposition of trade tariffs could be bearish for prices, Goldman Sachs Group Inc. and Citigroup Inc. said in separate reports.

If the tariffs severely affect the global economy, it could slash prices by as much as $11 to $19 a barrel next year, Goldman analysts led by head of oil research Daan Struyven wrote. His re-election would create “downside risks” to crude’s expected range of $75 to $90 a barrel, they said. 

The bank’s economists examined a scenario in which Trump imposes an across-the-board tariff of 10% on all goods imports, provoking a retaliatory levies of the same amount from other countries. The candidate has said he may target China with new tariffs ranging from 60% to as much as 100%.

“A Trump administration continues to pose mostly bearish risks,” analysts at Citigroup including Eric Lee wrote, pointing to “trade, oil and gas policy,” and his influence on the OPEC+ producer alliance.

Both banks added the caveat that Trump could also bolster oil prices if he renews the crackdown on Iranian exports deployed in his previous term. The former president had used a strategy of “maximum pressure” in an attempt — which ultimately failed — to renegotiate a nuclear pact with Tehran. 

Iranian output could fall by about 1 million barrels a day, or almost a third, during a second Trump term, Goldman projected. However, other exporters in OPEC+ would likely try to fill in the gap, limiting the boost to oil prices to roughly $9 a barrel.  

Despite Trump’s vow to bolster American oil production with a slogan of “drill, baby, drill,” the banks envisage little material impact on output, which is already at record levels. 

The most likely options available would include an increase in leasing and acreage auctions, and lifting any ban on leasing of the National Petroleum Reserve in Alaska, according to Citigroup. 

“Even though Trump appears to have a more oil and gas friendly agenda than a Democratic candidate, its immediate impact on physical oil markets is likely to be limited,” the bank said. “Broader market conditions look more binding on constraining US oil and gas production growth than regulatory factors.”

Earlier this year, Citigroup forecast that a Trump win would strengthen the bank’s confidence in prices sinking to $60 a barrel in 2025. Conversely, Sanford C. Bernstein analysts predicted in January that oil prices could strengthen during a Trump administration if it squeezed shipments from Iran.