By Florence Tan
SINGAPORE (Reuters) – Oil prices rose more than 2% on Monday, with Brent futures rising above $ 40 a barrel, after Joe Biden took office as US President and increased risk appetite, offset concerns. The impact on demand from the coronavirus pandemic is becoming increasingly severe.
Brent crude oil futures () for January delivery rose $ 1.06, or 2.7%, to $ 40.51 / barrel at 00:45 GMT and West Texas Central America () for December delivery at 38, 21 USD / barrel, up 1.07 USD or 2.9%.
Oil rebounded from a 4 percent drop on Friday, rising alongside other financial markets after Biden became the winner of the US presidential race on Sunday. Meanwhile, the dollar weakened, spurring blue-silver-denominated commodities as they became more comfortable for investors holding other currencies.
“Trading this morning has a taste of risk, reflecting the growing belief that Joe Biden will take over the White House, but the Republicans will keep control of the Senate,” said Michael McCarthy, market strategist at CMC Markets in Sydney.
“The result is ideal from a market point of view. Neither side controls Congress, so both a trade war and higher taxes are largely off the agenda.”
US President-elect Biden and his team are working to tackle the growing health crisis. The United States became the first country in the world since the pandemic started to surpass 10 million cases of COVID-19 infections, according to a Reuters inventory on Sunday.
“There will be some even bigger impacts, also highlighting the possibility of closures in the United States under Biden,” said OCBC economist Howie Lee.
“Either you are limiting your energy needs or consumption behavior.”
In addition, US oil production will increase as manufacturers exploit unfinished wells to increase production. According to Baker Hughes, the number of oil and gas rigs operating in the United States rose for the eighth week last week.
Key members of the Organization of the Petroleum Exporting Countries (OPEC) are wary of Biden’s easing measures against Iran or Venezuela in the coming years, which could mean an increase in output. making it difficult to balance supply with demand.
ING analysts say a return to Iranian oil supplies is more likely to happen by the end of 2021 or in 2022.
OPEC and its allies, a group known as OPEC +, are cutting production by about 7.7 million barrels a day to balance the global oil market.
China, the world’s top importer of crude oil, reduced its imports by 12% in October compared to September.
OCBC’s Lee said this data could be devaluing for the global commodity market: “China could run out of stock with what it has in stock.”
However, some analysts predict imports will increase in 2021 after Beijing increased its quota to 20%.
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