Oil prices fell on Thursday as Democrat Joe Biden edged closer to the White House in a nail-biting U.S. presidential election, though doubts remain over further huge stimulus to bolster the ecomony in the face of the coronavirus crisis.
Brent crude fell 33 cents, or 0.8%, to $40.90 a barrel by 0927 GMT and U.S. West Texas Intermediate (WTI) crude was down 39 cents, or 1%, at $38.76. Both contracts had jumped around 4% on Wednesday.
Biden predicted victory over President Donald Trump after winning two critical U.S. 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, including oil futures, said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
“The next few weeks could be quite tumultuous with looming court challenges and recounts,” analysts at RBC Capital Markets wrote in a note.
Current vote counting and trends suggest the Republicans are poised to retain control of the U.S. 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 U.S. dollar. And the U.S. dollar will remain volatile for at least the next few days as the U.S. election still has to be worked out,” said Commonwealth Bank commodities analyst Vivek Dhar.