Oil prices gained about 1% on Tuesday as a storm in the Gulf of Mexico threatened to disrupt U.S. production, and the U.S. dollar weakened on Election Day, with polls indicating a tightly contested presidential race.
Brent crude futures increased by 45 cents, or 0.6%, closing at $75.53 per barrel. U.S. West Texas Intermediate (WTI) crude climbed 52 cents, or 0.7%, to finish at $71.99.
“Crude oil prices are rising due to a mix of factors, including supply-demand dynamics, geopolitical concerns, election uncertainty, and weather events,” said Bob Yawger, director of energy futures at Mizuho.
As Americans cast their votes in a highly uncertain presidential election between Republican Donald Trump and Democratic Vice President Kamala Harris, analysts warned that the result might take days or weeks to finalize and could face legal challenges.
The U.S. dollar dropped to a three-week low against other major currencies, as traders adjusted their positions ahead of the election outcome. A weaker dollar makes oil cheaper for buyers using other currencies.
In economic news, U.S. services sector activity surged to its highest level in over two years in October, driven by strong employment gains, suggesting that last month’s weak job growth was an anomaly. However, the U.S. trade deficit widened to its largest level in nearly two and a half years in September.
Meanwhile, in the Gulf of Mexico, energy companies began evacuating workers from offshore platforms in preparation for Tropical Storm Rafael, which is expected to strengthen into a hurricane this week. Analysts predict the storm could disrupt oil production by up to 4 million barrels.
In a separate development, the Organization of the Petroleum Exporting Countries (OPEC+) announced on Sunday that it would delay a planned production increase by a month, pushing it back from December due to weak demand and rising non-OPEC supply. Saudi Arabia, the world’s top oil exporter, also reduced the price of its Arab light crude for Asia in December.
A Busy Week Ahead
Despite the price increase, risk-taking remained cautious as traders awaited several key events, including the U.S. election results, a U.S. Federal Reserve policy meeting, and China’s National People’s Congress (NPC) gathering.
“Markets are waiting to see if China’s NPC will announce any fiscal stimulus measures to boost demand, but there is little expectation of major decisions until the U.S. presidential results are known,” said Yeap Jun Rong, a market strategist at IG International.
The chairman of Gunvor, one of the largest oil traders globally, noted that oil demand growth is slowing and the industry may be over-investing.
U.S. oil storage data is expected later on Tuesday from the American Petroleum Institute, followed by reports from the U.S. Energy Information Administration (EIA) on Wednesday. Analysts forecast that U.S. energy firms added about 1.1 million barrels of crude to storage during the week ending Nov. 1, a sharp contrast to the 13.9 million-barrel increase seen in the same week last year and well below the five-year average of 4.2 million barrels.
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