Oil prices traded flat on Tuesday as traders waited cautiously for the outcome of the US Presidential election later in the day.
Oil prices had climbed sharply on Monday after the Organization of the Petroleum Exporting Countries and allies extended their voluntary production cuts till the end of December.
Even as prices had risen over the past couple of sessions, oil remained below its level seen late last year when the war broke out between Israel and Hamas.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $71.44 per barrel, mostly unchanged from the previous close.
Brent crude oil on the Intercontinental Exchange was also flat at $75.08 per barrel.
US elections, Fed meeting
As the world waited with bated breath for the outcome of the US elections, there was a bit of a calm in the oil market on Tuesday.
Oil prices have been volatile over the last month with heightened geopolitical tensions in the Middle East.
However, the oil market could just be waiting for more cues from the tightly contested election battle between former President Donald Trump and Vice President Kamala Harris.
Opinion polls show both Harris and Trump are locked in a close contest.
If Harris wins the elections, a status quo can be expected to be maintained on policies concerning the energy markets.
However, a Trump win could provide more cues to oil prices.
The former President of the US could ease sanctions on Russia and tighten those on Iran.
Moreover, Trump is also vocal about his support for more drilling of oil and gas in the country.
This could lead to more production of oil from the world’s largest producer.
Additionally, the oil market will also focus on the US Federal Reserve’s policy meeting later this week.
The Fed is expected to cut interest rates by 25 basis points.
Lower interest rates bode well for commodities as it increases liquidity in the economy and reduces borrowing costs for the public.
China NPC meeting in focus
China’s National People’s Congress kicked off a four-day meeting on Monday.
The market expects the political body to introduce more stimulus packages to boost the economy.
In October, China said it will increase its debt, but failed to provide any cues on the scale of spending, which disappointed the financial markets.
Recent reports claimed that the country could approve about $1.4 trillion in increased debt over the coming years.
China is the world’s largest importer of crude oil, and the second-largest consumer after the US Concerns about poor demand from China had weighed on oil prices for the most part of 2024.
Any concrete stimulus packages from China could support oil prices going forward.
Price forecasts
Oil prices have risen sharply after OPEC+ extended its production cuts on Sunday. Prices are likely to have support for the time-being.
“Despite the extension of production cuts, the oil market faces pressure from other significant forces.
Record-high US production is one of the most notable factors contributing to this pressure,” Muhammad Umair, author at Fxempire.com, said in a report.
According to experts, Brent prices could rise further towards $80 per barrel as the benchmark has already breached the 50-day exponential moving average of $75.
Christopher Lewis, author at Fxempire, said:
Short-term pullbacks could end up being buying opportunities and those buying opportunities will end up being valuable as far as I can see.
Lewis believes that the market will get further cues from the election results and the Fed meeting outcome.
“I would say this remains more or less a buy on the dip market, at least in the short term,” Lewis said.
For WTI, if prices could breach the immediate resistance of $72 per barrel, the US benchmark could rise towards $75 per barrel.
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