In a note to clients on Thursday, Citi strategists assessed how the upcoming U.S. presidential election in 2024, which is likely to be a battle between Donald Trump and Kamala Harris, could impact oil prices.
Under the Trump administration, the impact on the oil market “could be net bearish due to trade tariffs, pro-oil and gas policies/deregulation, and OPEC+ push to release oil into the market,” the strategists highlighted.
On the other hand, Citibank sees the possibility of increased sanctions on Iran under Trump as a major bullish factor, although this may have a limited impact.
Trump’s history with Iran suggests that reimposing sanctions could remove large amounts of Iranian oil from the market, thus driving prices higher.
On the other hand, Harris’ energy policies are expected to closely align with those of the current Biden administration, which may maintain or slightly increase regulatory pressures on the oil industry.
Harris’s approach to Iran is likely to be less confrontational, maintaining the status quo rather than reimposing tough sanctions. Her administration may continue to support diplomacy, reducing the likelihood of major disruptions to Iranian oil exports.
Moreover, Harris may be more supportive of a ceasefire in the Middle East, which could also contribute to enhancing stability in the region and its oil supply dynamics.
Meanwhile, Trump’s environmental policies may also play a role. Citigroup has said the administration could roll back environmental rules and halt tough fuel economy standards pushed by Democrats.
Trump’s stance against electric vehicle subsidies could slow the adoption of electric vehicles, supporting high demand for oil. However, strategists said Elon Musk’s recent endorsement of Trump “could mitigate this effect.”
In contrast, the Harris administration is expected to maintain or somewhat intensify the regulatory approach of the current administration.
“Harris’ energy policy will not look much different from the current administration’s,” strategists noted.
This includes supporting renewable energy initiatives and maintaining stricter regulations on fossil fuel production.
Potential impacts on oil prices also extend to infrastructure and regulatory measures. Under Trump, there could be efforts to increase leases and auctions of acreage for oil production, particularly on federal lands. This could boost domestic supply, but the immediate impacts could be limited by broader market conditions and the legislative process required to enact major changes.
On the other hand, Harris may push for stricter regulations under the Clean Air Act and Clean Water Act, though those rules could face legal challenges. Her administration may also aim to phase out sales of new internal combustion engine vehicles by 2035, “though that will again be challenged by the courts,” the strategists noted.
From a geopolitical perspective, Trump’s close relationship with Saudi Arabia could lead to increased oil supplies from OPEC+, which could lower prices, according to Citi. Similarly, Trump has also mentioned negotiating a deal to end the conflict between Russia and Ukraine. If successful, such a deal could also ease tensions in oil and gas markets.