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Change of guard in US may result in oil price volatility
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IANS | 16 Oct, 2020
Hit hard by the Covid-19 pandemic, the global crude oil market has been largely subdued this year.
The
upcoming US presidential election, which always has a significant
impact on markets across the board, will also play a crucial role in oil
price movement, given the divergent view of both the candidates on oil
and energy.
According to a report by Motilal Oswal Invesment
Services, President Donald Trump's re-election would bring stability in
prices, while Democrat candidate Joe Biden's victory is likely to bring
uncertainty and volatility.
"Crude oil investors are facing a
confused stance as President Trump's presidency brings stability and the
Presidency under Biden might bring uncertainty and more volatility in
the market," it said.
The report noted that if Trump is
re-elected, prices may remain in levels of $45 as he would like to keep
prices in this level to make sure gasoline prices remain in control,
which remains a main concern of the US taxpayers.
As per the
report, if US voters decide to stay the course, the current push for
energy dominance through increased drilling will continue. He is seen as
a promoter of ‘Shale' which might put pressure as any stimulus and
benefit to the shale sector would lead to overproduction and more
responsibility on OPEC+ to cut production and bring balance in the
market.
On the other hand, compared to a second term of the
Trump administration, according to the Motilal Oswal report, a Biden
Presidency could be a positive for the US oil and gas drillers because
tougher regulations on hydraulic fracturing would likely reduce
production, raising crude prices to levels of WTI $45-$55 in the coming
months after the elections.
Biden has pledged to end new
drilling on public lands and move toward a carbon-free future. With his
$2 trillion plan to cut greenhouse gas emissions, Biden might seem a far
from ideal President for the Texas oil and gas industry, it noted.
"Looks
like for crude oil to rally, markets are praying for Vice President
Biden to win and bring back optimism in the market as demand recovery is
stalling and it might take more months for crude demand to recover," it
said.
Biden's win is likely to be an upward catalyst for oil
prices because it will increase costs for shale patch and will likely
result in a weaker US dollar.
Over the past several months amid
the pandemic, crude oil prices have been largely subdued due to supply
glut along with poor demand.
Currently, the November futures
contract of WTI crude on the NYMEX is trading at $40.78 per barrel,
lower by 0.44 per cent. The December contract of Brent crude on the
Intercontinental Exchange was $42.91 per barrel, lower by 0.58 per cent
from its previous close.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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