Oil Futures Get Election Day Boost
WASHINGTON (DTN) -- On the day of pivotal U.S. presidential elections, crude and petroleum product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange chased equity markets higher. Investors increased their bets for a clear winner to emerge after polls close on Tuesday, lifting the odds that a comprehensive fiscal stimulus deal would be swiftly passed in Washington, D.C., to aid millions of American households and businesses in the face of the pandemic.
Americans are heading to the polls Tuesday after weeks of record-breaking early voting, with preliminary estimates suggesting more than 100 million Americans have already voted ahead of election day. Even as uncertainty looms large over the outcome of the election being contested, mainstream polls still suggest a "blue wave" of Democratic victories in several battleground states, which bodes well for a large stimulus deal in the winter months.
U.S. equity markets rallied in concert with a softening dollar index, which retreated 0.6% against a basket of foreign currencies to finish Tuesday trade at 93.560. Dow Jones Industrials soared by more than 600 points Election Day morning before paring a portion of those gains and S&P 500 advanced more than 1.9%.
Investors are also preparing for the Federal Reserve's two-day monetary policymaking meeting on Wednesday and Thursday, and the monthly jobs report, which the Bureau of Labor Statistics will release Friday morning.
On the session, NYMEX December West Texas Intermediate futures added 85 cents to settle at $37.66 per barrel (bbl) after trading above $38 per bbl and the January Brent contract on ICE finished just below $40 per bbl at $39.71 per bbl. NYMEX December ULSD futures gained 1.48 cents or 1.5% to $1.1271 gallon and the December RBOB contract advanced 2.49 cents to $1.0769 gallon.
Domestically, traders expect inventory data from the American Petroleum Institute due out at 4:30 p.m. EST to show commercial crude oil inventories added about 575,000 bbl during the final week of October, although there was a large range of estimates. Gasoline stockpiles are likely to have decreased by 1 million bbl and distillate inventories dropped by a steeper 2.3 million bbl from the previous week. Refinery run rates projected to have decreased 0.3% to 74.3% on the week.
Internationally, news reports on Tuesday suggest both Saudi Arabia and Russia, the leaders for a 23-nation producer group known as OPEC+, are considering deepening production cuts when they meet on Nov. 30-Dec. 1 to offset expected lost demand due to renewed lockdown measures in the European Union. Earlier this month, Russian President Vladimir Putin suggested the group would be flexible in its response to changing market dynamics.
Eurozone's largest economies, including Germany, France and the United Kingdom, reintroduced targeted lockdowns to curb the spread of coronavirus infections that will curb mobility. Oil trader Vitol expects global demand to average 96 million barrels per day (bpd) this winter, while Trafigura sees an even steeper contraction at 92 million bpd.
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