Tuesday Nov 10 2020 09:56
2 min
Two big factors have caused an oil price rally this week.
First: Joe Biden’s victory in the 2020 US elections.
Monday saw an initial 2% rise in WTI and Brent Crude prices after Biden was elected.
It’s thought that this jump was caused by the certainty and stability the announcement of an election winner has created.
It’s worth being cautious following the Biden-led rise.
One of Biden’s key presidential goals is to manoeuvre the US towards a zero-emissions future by 2050. It’s unlikely oil will play a big role in this.
However, WTI and Brent took an even bigger leap following Pfizer’s vaccine announcement.
Pfizer claims its Covid-19 vaccine is 90% effective after preliminary trials. We’re not out of the woods yet, but the news has been a massive positive.
Some light is peaking through the Covid clouds.
But for oil this was big news.
WTI shot up 11%, finally reaching over $40 per barrel, come Monday’s late-afternoon announcement. Brent rose 9% too.
Why? More oil demand is coming, according to forecasters. The success of the vaccine trials means lockdown could be easing sooner than expected.
More people will be moving about, manufacturing will be back, and oil production can begin again.
Another factor at play is OPEC’s decision to take production cuts to prevent a glut.
Essentially, it’s a good week for oil.
US crude oil stocks dropped 7.9 m barrels at the week commencing November 4th. That’s after stocks rose the previous week by over 4m barrels.
On the natural gas front, the picture is a little different from oil’s optimism.
Last week’s gas storage report shows consumption of up to 36bn cubic feet throughout the US, in-line with expected demand.
While this kept prices stable, November is being forecast as one of the hottest on record.
That may offset high LNG stocks, as there’ll be less demand due to low furnace and air conditioning usage throughout the United States.
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