Oil Gains 3% as Market Awaits US Election Outcome

By Adedapo Adesanya

Oil futures witnessed a spectacular gain of more than three per cent on Wednesday as crude supplies heavily dropped and the market remained uncertain about the outcome of the United States presidential election.

The Brent crude oil went up by 3.6 per cent or $1.43 to $41.14 per barrel while the US futures, West Texas Intermediate (WTI) crude, appreciated by 3.7per cent or $1.38 to $39.04 a barrel.

The Energy Information Administration (EIA) reported Wednesday that US crude inventories declined by 8 million barrels for the week ended October 30.

The figure matched the fall reported by the American Petroleum Institute ( API) beating analysts expectations of a weekly decrease of 600,000 barrels for the more closely watched EIA.

This came on the back of Hurricane Zeta which forced production declines in the Gulf of Mexico during the period.

The outcome of the US presidential election could also be crucial as a victory by incumbent Donald Trump is viewed as bullish for oil because of sanctions on Iran and his support for Saudi-led oil production cuts to support prices.

Meanwhile, a win for Joe Biden would be seen as bearish to neutral because of his support for green policies and a softer stance on Iran.

As at press time, the election had not produced a winner but the outcome would be very crucial for the oil market which is facing a coronavirus-induced demand slump.

However, the market also found strength on activities by members of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+.

The producers including Russia could consider deferring a planned increase in OPEC+ oil output from January as a second coronavirus wave stifles a recovery in fuel demand. Currently, the market is expected to ease cuts by 2 million barrels per day from the current 7.7 million barrels per day from January.

Analysts note that Saudi Arabia and Russia are discussing bigger cuts at present so as to stabilize the market. Supply developments in Libya will also raise the possibility that the OPEC+ group will consider a delay to the taper of its planned voluntary output cuts.

This decision if it pulls through will help oil price find support as lockdown in Europe weighs on demand. Italy, Norway and Hungary have tightened coronavirus curbs, following Britain, France and other countries.