By Adedapo Adesanya
Crude prices dropped on Thursday, November 5 as the highly contested presidential election in the United States remained with an unclear winner after two days.
The global benchmark, Brent crude, dropped 46 cents or 1.22 per cent to sell at $40.77 per barrel while the West Texas Intermediate (WTI) crude fell by 56 cents or 1.43 per cent to close at $38.59 per barrel.
The election, which currently has Democratic candidate, Joe Biden, in the lead, is very crucial to the oil market. The former Vice President was in the lead in electoral votes over President Donald Trump.
According to current conditions, a President Trump win would be more bullish for oil, analysts say, because of the President’s continued pro-oil policies.
On the other hand, his opponent said he would seek a path of diplomacy towards Iran, which could potentially bring Iranian barrels back to the oil market at some point next year under a Biden Administration.
But due to some other factors, analysts noted that a Biden presidency would not be as bad for oil prices as it would look on the face of it. One reason for this is because of a weaker US dollar, which typically boosts oil prices because crude becomes cheaper for holders of other currencies.
In addition, Republicans are set to keep the majority in the Senate while Democrats have lost a few seats in the House—this, according to analysts, would keep a President Biden from passing climate policies that could be too harsh on the oil industry.
A continued surge in COVID-19 cases in Europe and the US worries oil market participants who remain concerned that the return of lockdowns in Europe will significantly weigh on economic recovery and fuel demand.
This is not made easy by rising production from Libya, which is slowly trickling to one million barrels per day. This will further complicate the effect of supply cutbacks as lockdowns and the economic fallout from the coronavirus has sent fuel demand crashing.
The Organisation of the Petroleum Exporting Countries (OPEC), spearheaded by the Saudis and Russia, is currently keeping about 7.7 million barrels of daily output, roughly 8 per cent of world supply, to cushion the market from a glut. The coalition is due to meet on November 30 to December 1, amid growing expectations that it will keep these restraints in place in the first quarter of 2021, rather than ease them as originally planned.
Business Post had reported that Russian oil companies met with Energy Minister Alexander Novak on Monday to discuss the possibility of delaying the tapering by three months, which could be welcome for the oil market but not for oil-dependent economies who are facing the gun.
