Oil advanced to trade near $38 a barrel in New York as US President-elect Joe Biden prepared to transition to the White House, sparking a buoyant mood across markets.
Futures rose 2.5 per cent, following equity markets higher as more certainty emerged from the outcome of the vote. Biden declared victory and began preparations to navigate America’s pandemic-hit economy out of crisis, with potential shifts coming on a range of policies from fiscal stimulus to Iranian sanctions.
“Predictability and stimulus is what markets are rejoicing about,” said Bjarne Schieldrop, chief commodities analyst at SEB AB.
The optimism came despite a renewed expansion in Libyan supply. Production topped 1 million barrels a day over the weekend, compounding the headache for Opec and its allies as they prepare to meet at the end of the month to discuss output policy.
Though crude has started the week on a positive footing, the demand backdrop remains uneven. On the one hand, speculators are continuing to boost bearish bets as the virus hammers consumption in Europe. On the other, volumes of crude stored at sea are diminishing and Asian demand appears robust. When Opec+ meets, it must reconcile the differing outlooks to balance the market.
While headline prices have remained near $40 in recent weeks, Asian markets are showing tentative signs of strengthening and the structure of the Dubai market — the benchmark for West Asian crude — has firmed, according to ICE Futures Europe data. That shows concerns over a glut in the region are easing.
Among positive indications from China, a senior executive at the country’s biggest refiner said the nation’s oil imports are on course to rise 10 per cent this year. At the same time, Chinese motor sales continued to recover last month, with cars, SUVs and multiple-purpose vehicles rising 8 per cent from a year ago.
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