Oil prices largely steady as US election uncertainty dominates markets

Oil prices were largely steady on Thursday as Democrat Joe Biden edged closer to the White House in a close US presidential election, though doubts remain over further huge stimulus to bolster the economy in the face of the coronavirus crisis.

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Brent crude fell 2 cents to $41.21 a barrel by 1446 GMT and US West Texas Intermediate (WTI) crude was down 13 cents, or 0.3 percent, at $39.02. Both contracts had jumped about 4 percent on Wednesday.

Biden predicted victory over President Donald Trump after winning two critical US states while the Republican incumbent alleged fraud, filed lawsuits and demanded recounts in a bitter contest that has yet to be decided.

A drawn-out court battle over the results could cause additional uncertainty in the market, spawning further sell-offs within risky asset classes.

“A Trump win will likely to be bullish for oil, at least more bullish than under a Biden administration,” said Tamas Varga at oil brokerage PVM.

“Joe Biden will rejoin (the Paris climate agreement). He would also soften the US stance on Iran, consequently global oil supply could rise.”

Current vote counting and trends suggest the Republicans are poised to retain control of the US Senate, while the Democrats will hold a slimmed majority in the House of Representatives.

A divided Congress could hamper Biden’s plans on climate change, economic stimulus and the easing of sanctions on oil producer Iran.

Oil prices had surged on Wednesday on growing expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together called OPEC+, would hold off on bringing back 2 million bpd of supply in January, given demand has been sapped by new COVID-19 lockdowns.

“The volatility in oil will remain because of its sensitivity to the US dollar,” said Commonwealth Bank commodities analyst Vivek Dhar.