US Election: Impact on the Crude Oil Market

The crude oil markets are responsive to geopolitical events and the global economic outlook. Prices have been range-bound in recent months after staging a recovery from record negative pricing for US crude in April, but there are suggestions that the market has overestimated the recovery in demand in the aftermath of Covid-19 lockdowns.

Biden has called for a transition away from oil towards clean energy, but as this is a long-term goal, it would be unlikely to have an immediate impact on the oil markets if he were to win the election. And if Trump wins, there is also likely to be no real change in the direction of the commoditys prices.

The oil markets are likely to be more focused on how the global economic recovery unfolds, with the US election impact on markets remaining limited.

The market for the US benchmark West Texas Intermediate (WTI) crude stabilised over the summer, with strong support at $36 per barrel and resistance at $44 per barrel. The market has been trading within that range between $37 and $41.50 per barrel in October and the trend is set to continue in the short term.

Noting that crude oil prices have been volatile within a relatively narrow trading range for months, Hans van Cleef, senior energy economist at ABN Amro, said that “at the moment, there is little that seems to change this playing field for the oil market”.

However, he added that with oil demand remaining under pressure and supply cut agreements set to expire in the coming months, “OPEC and its partners have some tough discussions ahead of them. The direction of oil prices largely depends on the outcome of these discussions. The high volatility will persist for a while, while the oil price will at most be able to rise slightly.”