US Elections 2020: Oil jumps as inventory falls, market awaits U.S. vote results

U.S. oil prices jumped more than 2% on Wednesday after industry data showed crude inventories in the United States dropped sharply and as investors awaited results from the tumultuous presidential election.

West Texas Intermediate was up $1.01, or 2.7%, at $38.67 a barrel by 1138 GMT Tuesday, after gaining more than 2% in the previous session. Brent crude was yet to trade, having gained 3% on Tuesday.

Oil prices dropped more than 10% last week with rising coronavirus cases around the world and more restrictions on movement hitting demand prospects. U.S. oil has nearly recouped those losses in three days of gains this week in the run-up to the election.

Still, "the market is ... cautious heading into the U.S. presidential election," ANZ Research said in a note.

"The two contenders have significantly different energy policy platforms, which could impact the crude oil demand," ANZ said. "We expect a Biden victory to weigh on crude prices in the medium term," referring to U.S. Democratic challenger Joe Biden.

U.S. crude oil stocks fell sharply last week while gasoline inventories rose, data from industry group the American Petroleum Institute showed on Tuesday.

Crude stockpiles fell by 8 million barrels last week to about 487 million barrels, the American Petroleum Institute showed on Tuesday. [API/S]

That contrasted with analysts` expectations in a Reuters poll for an increase of 890,000 barrels.

More lockdowns could put a cap on oil price gains as Italy, Norway and Hungary tightened COVID-19 restrictions, following the UK, France and other countries.

Supporting prices, OPEC member Algeria backed deferring a planned increase in OPEC+ oil output from January and Russia`s energy minister raised the prospect with the country`s oil producers.

The Organization of the Petroleum Exporting Countries (OPEC)and allies led by Russia, a grouping known as OPEC+, are set toreduce cuts of 7.7 million barrels per day (bpd) by around 2million bpd from January.

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Sources said OPEC and Russia are considering bigger production reductions next year to support prices.