Brent crude surpasses $ 40 after Biden win raises risk-takers By Reuters

By Florence Tan

SINGAPORE (Reuters) – Oil prices rose more than 2% on Monday, with Brent futures topping $ 40 a barrel, after Joe Biden won the US presidency and boosted risk appetite, offsetting concerns about the impact on demand of a worsening coronavirus pandemic.

Brent () futures for January climbed $ 1.06, or 2.7%, to $ 40.51 a barrel at 0453 GMT, and U.S. West Texas Intermediate () crude for December was 38 . $ 21 per barrel, up $ 1.07, or 2.9%.

Oil recovered from a 4% drop on Friday, rising with other financial markets after Biden became the winner of the U.S. presidential race on Sunday. Meanwhile, the dollar weakened, boosting commodities valued in the greenback as they became more affordable for investors holding other currencies.

“This morning’s trading has a taste of risk, reflecting growing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The result is ideal from a market point of view. Neither side controls Congress, so trade wars and tax hikes are largely off the agenda.”

US President-elect Biden and his team are working to tackle the worsening health crisis. The United States has become the world’s first nation since the pandemic began to surpass 10 million COVID-19 infections, according to a Reuters tally on Sunday.

“There will be repercussions later down the road,” OCBC economist Howie Lee said, of the possibility of lockdowns in the United States under Biden.

“Either you limit the demand for energy or the consumption behavior.”

Meanwhile, US oil production is expected to rise as producers tap a backlog of unfinished drilled wells to boost production. The number of operating oil and gas rigs in the United States increased for an eighth week last week, according to Baker Hughes.

Key members of the Organization of the Petroleum Exporting Countries (OPEC) are wary of Biden’s easing measures on Iran or Venezuela in the coming years, which could mean an increase in production that would make it more difficult the balance between supply and demand.

ING analysts said the return of Iranian oil supplies is more likely to occur in late 2021 or 2022.

OPEC and its allies, a group known as OPEC +, are cutting production by around 7.7 million barrels per day to balance global oil markets.

China, the world’s largest importer of crude, posted a 12% drop in October imports from September.

This data may be bearish for global commodity markets, OCBC’s Lee said: “China could be near the end of what it needs in commodities given the amount of inventory it has. . ”

Some analysts, however, predict an increase in imports in 2021 after Beijing increased its quotas by 20%.