Oil hits one-week high on weak dollar ahead of US election results; Brent nears $76/bbl, WTI extends five-day streak
- Brent futures were up 73 cents, or one per cent, to $75.81 per barrel, while the US West Texas Intermediate (WTI) crude rose 78 cents, or 1.1 per cent, to $72.25
International crude oil prices edged one per cent higher to hit a one-week high on Tuesday, November 5, ahead of what is expected to be an exceptionally close US presidential election, after rising more than more than two per cent in the previous session as the Organisation of Petroleum Exporting Countries (OPEC) delayed plans to hike crude supply and production in December.
Brent crude futures were up 73 cents, or one per cent, to $75.81 per barrel, while the US West Texas Intermediate (WTI) crude rose 78 cents, or 1.1 per cent, to $72.25. That put Brent on track for its highest close since October 25 and WTI, which was up for a fifth day in a row, on track for its highest close since October 14. Back home, crude oil futures last traded 0.02 per cent lower at ₹6,053 per barrel on the multi commodity exchange (MCX).
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Brent hits one-week high: What's driving crude oil prices?
-The dizzying US presidential contest between Republican former President Donald Trump and Democratic Vice President Kamala Harris hurtled toward an uncertain finish on Tuesday as millions of Americans headed to the polls. Analysts say the US Presidential election result might not be known for days, if not weeks and it will most plausibly be challenged and contested
-The OPEC group also stole the show. Brewing Middle East tension and the weaker dollar also played their parts in sending oil higher. The US dollar slid to a three-week low versus a basket of other currencies as traders squared positions ahead of the US election. A weaker greenback makes oil less expensive in other countries, which can increase demand for the fuel.
-Elsewhere in the US, energy firms in the Gulf of Mexico started evacuating workers from offshore platforms ahead of Tropical Storm Rafael, on track to strengthen into a hurricane this week. Analysts say the storm could reduce oil production by about four million barrels. Chevron Corp. shut in its production in the US Gulf while Shell Plc is evacuating some non-essential personnel in the area.
-Oil prices had been supported by the announcement on Sunday by the OPEC and their allies, a group known as OPEC+, to push back a production hike by a month from December as weak demand and rising non-OPEC supply depress markets. Still, risk-taking remains limited with a busy week - including the US election, the US Federal Reserve's policy meeting, and a meeting of China's National People's Congress (NPC) keeping many traders on the sidelines.
-Analysts are also eyeing China's NPC meeting for any clarity on fiscal stimulus to uplift the country's demand outlook, but investors are unlikely to see any strong commitment before the US presidential results, and that will continue to keep crude oil prices in a near-term waiting game.
-The chairman and co-founder of Gunvor, one of the world's largest oil traders, meanwhile, said there is little growth in oil demand and the industry is probably over-investing somewhat. Saudi oil giant Aramco reported a 15.4 per cent drop in third-quarter profit due to lower crude prices and weaker refining margins, but maintained its generous dividend at $31.1 billion for the quarter.
-"WTI crude oil rallied three on Monday to $71.80 per barrel, as OPEC+ delayed a planned partial rollback of its production cuts by one month, citing weak prices amid a fragile economic outlook. The re-escalation of tensions between Israel and Iran over the weekend, with Iran warning of a "crushing response" that could extend beyond missiles and drones, added further support to crude prices," said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.
Also Read: OPEC trims 2024 global oil demand forecast to 1.93 million bpd on bulk of China downgrade
-The US benchmark WTI has lost more than 10 per cent since the end of June on disappointing Chinese demand and rising supply from the Americas, a trend that prompted the OPEC alliance to push back a plan to restore production. Saudi Arabia lowered oil prices for buyers in Asia for December, a sign that sluggish demand in China is outweighing tensions in the Middle East.
Where are crude oil prices headed?
Analysts said crude oil extended its gains as OPEC+ announced a delay in increasing output by 2.2 million barrels per day for another month, citing lower prices. Prices were bolstered by an unexpected decline in US oil inventories last week. The market is anticipating significant economic support measures from the Chinese government which will likely hold a stimulus meeting this week
Analysts believe these expectations are fueling optimism around increased demand for oil. However, elevated US oil stocks and uncertainty surrounding the upcoming US Presidential elections are capping potential gains.
"We expect crude oil prices to remain volatile this week, influenced by fluctuations in the dollar index, geopolitical tensions, and the lead-up to the US elections. Crude oil has support at $70.50-69.70 and resistance at $71.90-72.50. In INR terms, support is seen at ₹5,960-5,870, with resistance at ₹6,100-6,165," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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