Americas News
U.S. Election And Big Stock Draw Results In 4% Price Gains For Oil
A third straight day of gains, on the order of 4 percent, was achieved on Wednesday for oil, following another surprise drop in U.S. inventories that once again tests the analytical contention that the rise in coronavirus infections is ruining demand recovery.
The gains were also said to be influenced by the tight U.S. election results as of Wednesday afternoon.
U.S. weekly crude oil exports fell by 1.2 million barrels per day (bpd) to about 2.3 million bpd last week, the biggest drop since January, and production dropped 600,000 bpd to 10.5 million bpd; this in turn caused West Texas Intermediate to settle up $1.49, or 4 percent, at $39.15 per barrel, while Brent settled up $1.52, or 3.8 percent, at $41.23 per barrel.
While the expectation of a Joe Biden presidential win would seem to obliterate the possibility of a bull market for oil (because Biden supports green policies and Donald Trump supports Saudi Arabia output cuts and the Iran sanctions), Artem Abramov, head of shale research at Rystad Energy, explained traders' confidence in oil on Wednesday by remarking, “Perhaps the biggest conclusion to be drawn at this stage is that there is only a small likelihood that existing oil & gas tax incentives will be removed in the U.S. – even if Biden emerges as the winner – given the narrow margin of victory and a probable Republic majority in the U.S. Senate.”
Meanwhile, the election has resulted in one small victory for oil, namely, Republican Jim Wright was elected as one of three powerful commissioners at Texas’s oil and gas regulator; he stated, “Texas will determine its own energy future, and that is a future that includes an all of the above approach led by fossil fuels.
“Together we will find new ways to improve our climate and environment.”
Election aside, the rising Covid infection rates still remained the predominant worry for pundits, and John Kemp, commodities analyst for Reuters, noted on Wednesday that while Brent’s six-month calendar spread had been tightening in September and October, it has gone into reverse over the past 10 days.
He wrote, "So far, the spread reversal is only a relatively weak signal that the market rebalancing process is being blown off course... but [it] has been an accurate indicator of changes in the production-consumption balance since the start of the year."
Wednesday also saw continued losses for U.S. producers, this time Marathon Oil Corp, which reported a fourth straight quarterly loss of $317 million compared to a profit of $165 million a year earlier.
