Tuesday found oil traders struggling to make up their minds on how to interpret the result of the previous day’s OPEC+ meeting.
Prices swing from gains to losses and back to gains, close to yesterday’s levels, as an undecided market took pleasure in reassuring words that the alliance will shield oil prices from another collapse.
But are words providing a relief on their own? No, action is needed and the lack of it is the reason that prices are not seeing any meaningful increase today.
Uncertainty is the word now and until new demand indicators signal a direction, prices are not likely to move significantly.
Another reason for uncertainty is the outcome of the coming US election, as the two candidates have conflicting plans for the future of energy.
The election is around the corner and it could also have consequences for foreign policy depending on the results. This uncertainty is probably also a reason that OPEC+ chose to wait rather than take an early decision to continue the current deep cuts into 2021.
The US is a wild card and the elections could swing the market in either side depending on the outcome and the policy changes.
Furthermore, markets are still left guessing if the US stimulus negotiations will bear fruit today before Nancy Pelosi’s self-imposed deadline.
A stimulus deal would be a positive surprise for markets and could also support and also support oil prices if confirmed.
It seems unlikely though as the presidential candidates are preoccupied with preparing for the final debate on Thursday ahead of the elections.
Next thing on traders’ calendar is how US oil stocks were altered last week, providing a good indication for the market about the ‘on the ground’ consequences of the demand’s lagging recovery.
Should there be a build on crude stocks, this will be a warning sign that supply is overflowing again because demand can’t take more oil. If we see draws prices could rise on confidence about the market’s resilience.
