By Myra P. Saefong
Capital Economics says it could take years to see an enormous election affect on the power market
The U.S. election end result is not more likely to have a big effect on commodities similar to power, metals and grains within the brief run, however oil and pure fuel could possibly be influenced within the years to return by who wins the presidency given the variations within the candidates’ insurance policies, in accordance with Capital Economics.
“The end result of the U.S. election will not have a sizeable affect on most commodity costs over the subsequent few months,” wrote Invoice Weatherburn, senior local weather and commodities economist at Capital Economics, in a Tuesday word. “As a substitute, variations between the candidates’ views on automobile emissions, [liquified-natural-gas] exports and foreign-policy stance on Iran might have an effect on oil and [natural-]fuel costs over the subsequent 5 years.”
A win for Republican nominee and former President Donald Trump would supply “extra encouragement” for oil and natural-gas drilling than a presidency by Democrat and present Vice President Kamala Harris, he added, however that may solely help U.S. manufacturing “on the margin.”
12 months up to now as of Monday, West Texas Intermediate crude futures (CL.1) (CLZ24) had been buying and selling practically 6% decrease, whereas international benchmark Brent crude (BRN00) (BRNZ24) has misplaced greater than 7%. Futures costs on Tuesday fell modestly, extending steep declines of greater than 6% a day earlier as geopolitical dangers to Center East oil move eased.
U.S. oil and fuel manufacturing has climbed to file highs underneath President Joe Biden, so it is tough to see how the business has been considerably impeded by a Democratic administration, mentioned Weatherburn. U.S. subject manufacturing of crude was at a file excessive of 13.5 million barrels per day for the week ended Oct. 18, in accordance with the Power Data Administration.
Harris, in the meantime, has not outlined any plans to manage the sector greater than Biden, he famous. Weatherburn expects costs and productiveness enhancements to be the “key determinants” of U.S. oil and fuel output over the subsequent few years – and if oil costs fall, manufacturing is “unlikely to rise a lot additional.”
When it comes to demand, Trump, if elected, is anticipated to attempt to take away subsidies for electrical automobiles or weaken vehicle-emission requirements. If that occurs, it could result in increased U.S. oil demand, Weatherburn mentioned.
Nevertheless, Trump’s friendship with Tesla Inc. (TSLA) Chief Govt Elon Musk means that the “established order could also be maintained and that the U.S. automobile fleet will steadily turn out to be extra gas environment friendly as electric- and hybrid-vehicles gross sales rise,” he added.
Underneath a Trump presidency, there is a threat that tariffs on metal (HRN00) and aluminum are additional expanded to use to Canada, the European Union and Mexico, all of that are at present exempted, mentioned Weatherburn.
Provided that metal imports make up 20% to 25% of U.S. consumption of the steel, “tariffs on exempt companions would make home metal dearer,” he famous.
‘A Trump presidency could be extra inflationary than a Harris one, and it could most likely be extra unsure too – each of which make gold a gorgeous asset.’Invoice Weatherburn, Capital Economics
Gold, in the meantime, has climbed in October alongside the rising chance of a Trump victory, mentioned Weatherburn. “A Trump presidency could be extra inflationary than a Harris one, and it could most likely be extra unsure too – each of which make gold a gorgeous asset,” he wrote.
Learn: Gold hasn’t been performing prefer it usually does. What which means for traders.
If Harris wins, that might imply gold costs fall again within the weeks following the election end result, he added. Nevertheless, towards the backdrop of U.S. interest-rate cuts, Capital Economics believes gold costs would rise once more in 2025.
On Tuesday, gold for December supply (GC00) (GCZ24) settled at a file excessive of $2,781.10 an oz on Comex, up $25.20 or 0.9% for the session, after buying and selling as excessive as $2,784.90.
-Myra P. Saefong
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10-31-24 0724ET
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