Oil markets unfazed by US mid-term congressional election results

Source: ICIS News

2018/11/07

HOUSTON (ICIS)--Crude oil prices rose in early trading, not necessarily because of the election results, but in response to a correction to oversold conditions after finishing down seven consecutive sessions and recently hitting eight-year lows.

In a widely expected outcome, the US Democratic party gained control of the House of Representatives, while President Donald Trump’s Republicans maintained control of the Senate.

In what was expected to be a referendum on Trump’s political agenda, Democrats appear to have gained close to 30 seats in the lower chamber but failed to get control of the Senate, with Republicans appearing to actually add two seats to their majority.

Whether it means gridlock or a balance of power, the Congress and the Executive Branch will have to figure out how to work together and compromise or face political polarization and uncertainty. With Democrats now chairing congressional committees, they will have the power to increase regulatory measures and scale back the administration’s agenda.

Stock markets rose sharply on low expectations that financial and economic measures, such as corporate tax cuts and regulatory laws already enacted, will be reversed.

The new Congress is also not expected to have much impact on the oil industry or the White House energy agenda since most decision are made by agencies of the Executive branch.

The market has been factoring in Washington’s sanctions targeting Iran’s oil industry but not necessarily on granting temporary 180-day waivers and exemptions to eight countries to continue buying oil.

Rising production in the US, Russia and Saudi Arabia and a recent announcement by Iraq to raise output in order to compensate for Iranian export losses added to the bearish sentiment.

Two closely watched election results showed voters in Colorado rejecting a measure that might block fracking and drilling activity in public lands.

In Florida, an amendment appeared to have passed banning drilling in offshore in east or west state waters.

In typical Trump fashion, he declared the election results a “big win” for the administration but, in reality, the finger-pointing will soon start as to the reasons for losing the House to the Democrats and in a lame-duck Congress not much may be accomplished before the new year.

Losing congressmen may focus more on clearing their desks and figure out how to help staffers who are losing their jobs, while pundits and politicians will began speculating the outcome of the 2020 presidential elections.