Brent gains as global markets brace for US election day

The front-month ICE Brent contract has traded $0.48/bbl higher on the day, to trade at $75.32/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Oil prices have moved higher on the much-awaited US presidential election day, with global markets shifting focus on the neck-to-neck race between the Democrats and Republicans, market analysts said.

Speculative traders have geared up for the election day volatility, “with the coin-flip race between Kamala Harris and Donald Trump,” SPI Asset Management’s managing partner Stephen Innes said.

Besides, oil investors are waiting for the outcome of the US Federal Reserve’s (Fed) policy meeting on Thursday, where the central bank is expected to cut key interest rates. “[Oil] markets remain locked in on expectations for a quarter-point rate cut on Thursday, followed by an additional 100 basis points of easing over the next 12 months,” Innes remarked.  

Lower interest rates in the US can make dollar-denominated commodities like oil more affordable, hence supporting demand growth.

Downward pressure:

Weak economic data from the US has put some downward pressure on Brent’s price.

Manufacturing Purchasing Managers' Index (PMI) in the US, the world’s largest oil consumer, came in at 46.5% in October, down from the 47.2% growth achieved in September, the Institute for Supply Management (ISM) reported.

The data shows that manufacturing activity in the US contracted in October for the seventh consecutive month, according to ISM.

A PMI reading below 50 typically indicates weak economic health and a contraction in the manufacturing sector, which includes production, inventory levels, new orders, etc. It also highlights demand growth concerns, ultimately weighing down on prices of commodities like oil.

By Aparupa Mazumder

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