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Biden win lifts oil prices but IEA official says Europe lockdowns could hit demand

Tom Belger
·Finance and policy reporter
·2-min read
Exhaust billows from Philadelphia Energy Solutions Refining Complex in Philadelphia, Thursday, June 27, 2019. The largest oil refinery on the East Coast said Wednesday that it will close after a devastating fire last week that set off explosions and damaged equipment. (AP Photo/Matt Rourke)
Exhaust billows from Philadelphia Energy Solutions Refining Complex in Philadelphia. Photo: AP/Matt Rourke

Crude oil prices have jumped in the wake of the US presidential election, joining in a global stock market rally on Monday.

West Texas Intermediate Crude prices (CL=F) in the US gained 2%, trading at $37.88 (£28.78) in early trading as the week got underway.

Meanwhile widely traded brent futures contracts (BZ=F) also leapt 2%, rising to $40.24 (£30.58) at around 4am eastern time in the US (9am in London.)

Analysts have said the absence of a “blue wave,” with the Democrats failing to take the Senate, boosts the outlook for the oil industry.

UBS Global Wealth Management highlighting the reduced prospects of an “aggressive green agenda” in a note at the end of last week. Joe Biden has pledged to rejoin the Paris climate agreement on his first day in office, and net zero carbon emissions by 2050.

But the Democrat’s victory without control in the Senate is likely to curtail his ability to take on the powerful energy industry. The Republicans and Democrats currently stand at 48 senators each, with Associated Press reporting North Carolina and Alaska remain too close to call and two Georgia seats set for a run-off in January.

Keisuke Sadamori, the International Energy Agency (IEA) director for energy markets and security, told Reuters: “The oil and gas industry, in the U.S. in particular, is looking at the outcome of this election with a huge amount of interest.

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“If the Democrats plan for radical energy low-carbon transformation -- if the Senate remains in the hands of Republicans, there will be obstacles to that legislation. Overall, we need to see the entire outcome.”

Peel Hunt analyst Ian Williams said in a note that the dollar’s decline against many currencies since Biden’s victory was called was also propping up oil prices. “A broadly weaker US dollar is also boosting demand in the commodity space, with oil gaining around 1%.”

The dollar’s decline reflects predictions of a stronger international trade environment and more Federal Reserve stimulus under Biden and a Republican-controlled Senate.

Chinese economic data over the weekend may have given oil prices further support, with exports in October up 11.4% year-on-year and beating consensus estimates.

But the IEA’s Sadamori noted likely headwinds for the industry with infection rates and restrictions tightening in parts of Europe. “Major parts of the European continent are in lockdown. This would surely work toward the negative side,” he said.

Reuters reported he declined to say whether the IEA would lower its forecasts, with the organisation due to publish its latest figures on Thursday.

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