Crude Oil prices ended the last trading session on a bearish note.
Oil prices have been under pressure in the last few days, as it seems the most likely winner of the election, Joe Biden, would be in charge of the world’s most important economy. The assumption that his major focus would be on renewables, sent oil prices tanking below $40/barrel.
What we know
Brent crude prices closed 3.62% lower to settle at $39.45 a barrel. U.S. West Texas Intermediate dropped 4.25% to settle at $37.14 a barrel.
Still, both contracts gained in the week, with Brent up 5.8%, and U.S. crude rising 4.3%.
Also, the rising COVID-19 caseloads across the Northern Hemisphere halted the bull’s track, as oil traders’ fears got strengthened on the bias of lackluster demand and as the U.S election got drawn out over days.
Europe’s second-largest economy, France disclosed a record number of COVID cases amid efforts in its most recent lockdown measures prevailing at the moment has hence weakened demand for energy in the French Republic.
In the U.S. election, Joe Biden took the lead over President Donald Trump in Georgia and Pennsylvania, edging closer to winning the White House as a handful of states continue to count votes, making oil traders halt their long bullish bias.
It also seems likely that the Iranians would have their oil back in an already saturated market under a Joe Biden presidency.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi gave insights on the prevailing macro, that could weigh in on oil prices in the future. He said:
“The oil market weighs the possible impact of more significant restrictions on domestic US oil and gas production from Joe Biden’s presidency versus more support for energy transition and the probability of re-engagement with Iran.”
The latter seems the most significant risk for the oil price, but it is unlikely that it will be a priority for the first year of a new administration.
By far, the most critical questions for oil are how quickly a Covid-19 vaccine is widely available, whether a US stimulus deal can be achieved in a fractious and uncertain political environment, and how OPEC will respond to demand concerns.
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What to expect
As we head to end yet another roller-coaster week in the analysis of oil trading, one would have to think it is encouraging that OPEC+ continues to signal that the group will do what it can to backstop the oil price, while we wait for the demand outlook to improve.