A Democrat sweep of the U.S. election is likely to give oil prices a short-term boost but could well lead to more pain early next year.
That’s because of how the result is likely to affect OPEC+’s thinking on whether to go ahead with its planned taper of production cuts from January. With a second wave of Covid-19 menacing Europe and the U.S., many observers are of the view that a delay is likely.
However, a Democrat victory might change that. While Joe Biden’s climate plans could weigh on oil prices in the long term, JPMorgan sees a ‘Blue Wave’ scenario -- in which Democrats control both houses -- spurring a 10% to 15% jump in oil in the month after the election on a combination of fiscal stimulus and dollar weakness.
Even if the price increase wasn’t that big, that could lull OPEC+ into a false sense of security over the demand outlook. Investors could then be in for a rough ride in January if a worsening virus coincides with more crude production.
That’s because of how the result is likely to affect OPEC+’s thinking on whether to go ahead with its planned taper of production cuts from January. With a second wave of Covid-19 menacing Europe and the U.S., many observers are of the view that a delay is likely.
However, a Democrat victory might change that. While Joe Biden’s climate plans could weigh on oil prices in the long term, JPMorgan sees a ‘Blue Wave’ scenario -- in which Democrats control both houses -- spurring a 10% to 15% jump in oil in the month after the election on a combination of fiscal stimulus and dollar weakness.
Even if the price increase wasn’t that big, that could lull OPEC+ into a false sense of security over the demand outlook. Investors could then be in for a rough ride in January if a worsening virus coincides with more crude production.