Oil Rises as OPEC+ Delays Output Hike Amid Election Uncertainty

(Bloomberg) -- Oil advanced after OPEC+ agreed to push back its December production increase by one month and traders braced for jumpy trading ahead of the US election.

West Texas Intermediate rose about 3% to around $71.50 a barrel, while Brent traded near $75. Saudi Arabia and its allies delayed a series of monthly output hikes until early next year, a move anticipated by many traders amid an impending glut. 

The US election, now only one day away, also is contributing to heightened market volatility. The dollar weakened — offering another support to crude prices — after new polling suggested traders were underestimating the prospect of a win for Democrat Kamala Harris, leading investors to unwind their so-called “Trump Trade” bets. 

“The challenge for oil markets is that they’re getting caught up in the election uncertainty,” said Rob Haworth, senior investment strategist at US Bank. The event “isn’t necessarily driving prices, but it is driving investor sentiment.”

With the OPEC+ decision helping to crystallize near-term supply outlook, traders will be honing in on a looming Fed rate decision and stockpile data this week to get a better sense of the US demand picture, Haworth said.  

Meanwhile, Iran escalated its rhetoric, with supreme leader Ayatollah Ali Khamenei warning Saturday of a “crushing response” to Israel’s recent strike. The Wall Street Journal reported that Tehran told allies an attack would come after Tuesday’s US presidential vote, but before January’s inauguration, and it wouldn’t be limited to missiles and drones as two previous strikes were.

In the Americas, Tropical Storm Rafael threatens to menace offshore oil and natural gas production areas in the western Gulf of Mexico.

Oil prices have become increasingly volatile, with concerns of an oversupply next year and lackluster demand in top importer China vying against unrest in the Middle East, which supplies about a third of the world’s crude.

The oil market has a number of key events on the horizon this week aside from the US election, such as a meeting of China’s top legislative body. Saudi Aramco is scheduled to release its official prices for December, with the producer expected to lower its rates for Asia, according to a Bloomberg survey. 

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