Crude futures rise on OPEC+ news, API data, as market eyes US election

Singapore — 0303 GMT: Crude oil futures jumped during late morning trade in Asia Nov. 4 on optimism over a possible extension of OPEC+ supply cuts and the American Petroleum Institute's report of a massive draw in US crude inventories, but uncertainty over the US presidential election results tapered the price gains.

At 11:03 am Singapore time (0303 GMT), ICE Brent January crude futures were up 66 cents/b (1.66%) from the Nov. 3 settle to $40.37/b, while the NYMEX December light sweet crude contract was 70 cents/b (1.86%) higher at $38.36/b.

January ICE Brent and December NYMEX crude futures had jumped 1.9% and 2.31% Nov. 3 to settle at $39.71/b and $37.66/b, respectively, with market analysts attributing the rise to the weakening of the US dollar amid expectations of a post-election US fiscal stimulus package.

The OPEC+ countries had banked on a rebound in the coronavirus-stricken demand for oil in the second-half of 2020, and had agreed to taper their collective 7.8 million b/d production cuts to 5.8 million b/d from January onwards, but OPEC+ delegates told S&P Global Platts on Nov. 3 that unimproved fundamentals have largely forced a consensus within the alliance that the increase in production needs to be delayed, although exact details remain very much in flux.

Algerian energy minister Abdelmadjid Attar, who holds OPEC's rotating presidency, told his country's parliament Nov. 3 that he was in favor of maintaining current cuts through the first few months of 2021, while the Russian energy minister had held talks with domestic producers over the same issue a day earlier.

Sources told Platts Nov. 3 that if prices remain weak, the OPEC+ coalition could even revert back to its May-August quotas, when the cuts totaled 9.7 million b/d.

Vandana Hari, CEO of Vanda Insights noted the importance of these reports favoring an OPEC+ intervention to the oil price trajectory, but added that amid the bustle of the US elections, the markets had not "completely priced them in" yet.

"Indications of the OPEC+ maintaining their current production cuts would have had a bigger impact on prices if not for the US elections. Traders are attempting to take a position in the market based on their extrapolation of the interim election results. Despite being up from [Nov. 3], crude seems to be under some pressure in the initial phase of the results showing a Biden lead, reinforcing the notion that a Biden win will weigh down the oil complex."

"It is likely going to be a volatile day," Hari added.

Meanwhile, the oil market was also buoyed by API data released late Nov. 3, which showed that US crude stocks had plummeted 8.01 million b/d in the week ended Oct. 30.

However, the dramatic fall in crude stocks could have been due to the exacerbating effects of Hurricane Zeta, which at its peak had shuttered 84.8% or 1,569,517 million b/d of crude capacity in the US Gulf.

Either way, Hari surmised that the market is too distracted by the US elections to concern itself with the API data.