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Rising US stock indices, a retreating dollar, and rumors of a deal between Democrats and Republicans for additional fiscal stimulus before the November 3 election brought oil back to life. Brent quotes rose to weekly highs, however, it is unlikely that the existing positive will be enough to continue the rally. It's another matter if the market gets news about an increase in global demand.
Although the number of deaths from COVID-19 in the world has exceeded 1 million people, the topic of the presidential elections in the United States is gradually gaining a place in the sun from the pandemic. Donald Trump does not intend to just give up power if he loses. The current owner of the White House claims that the results may be falsified due to voting by mail. Uncertainty about the outcome of the election is added to uncertainty about the timing of the announcement of the results and further actions of the Republicans, which leads to an increase in demand for safe-haven assets and a correction in US stock indices.
Donald Trump and his team portray Joe Biden as the man who will end the era of America's energy dominance due to the transition to low-carbon technologies. Given that American oil production hit a record 13 million b/d in November and then plummeted due to the pandemic, it is quite unusual to hear the word "era" applied to a period of several months. Also, if stricter standards are not introduced in the oil industry, this does not mean that it will begin to recover rapidly. Tougher mileage standards don't matter if people don't have the option to buy a car.
In my opinion, the US oil industry should not be afraid of Joe Biden's election victory. Most likely, it will lead to a weakening of the US dollar due to the growth of the double deficit. The fall in the USD index is a bullish driver for black gold.
Thus, the risks of the victory of Democrats on November 3 are not the biggest problem for the oil market. The bulls need a fresh driver to continue the rally, best of all in the form of news about the growth of global demand. A hint can be given by the release of data on American oil reserves. According to Bloomberg experts, in the week to September 26, they increased by 1 million barrels, however, gasoline stocks may decline for the 9th time in a row, which is good news for Brent and WTI.
Dynamics of gasoline stocks in the United States
Although there is moderate pessimism in the forecasts of leading oil traders, including Vitol, Gunvor, and Mercuria (companies do not expect global demand to reach a peak before 2030 and expect long-term Brent consolidation near $ 45 per barrel over the next 6 months), I believe that the glass is half full. Deaths from COVID-19 in the second wave are not as high as in the first, vaccines are on the way, and the recovery of the global economy and global oil demand continues. In this regard, traders should use strategies for buying the North Sea variety. A break in the resistance at $ 43.5 per barrel could open the way for the bulls to move north towards $ 45 and $ 47.2.
Brent, the daily chart
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