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Commenting on the market reaction to the US Energy Information Administration’s latest Petroleum Status Report, “traders very much chose to focus on unrelated positives such as OPEC+ signals pointing to a no return of shuttered production in early-2021 and the results of the US elections,” said TD Securities analysts.

Key quotes

“With no Blue wave, markets likely believe that there will be no policies which will destroy crude demand, which suggests that demand recovers along with the rest of the economy once the pandemic is in the rearview mirror. This drove WTI up some 3.3% to nearly $39/bbl.”

“Given that the new US government will be less likely to fundamentally diversify energy sources, it is very likely that once a vaccine is deployed and new stimulus is passed (albeit smaller than if we had a Blue Wave) oil demand will continue to recover along with the economy.”

“As such, with OPEC+ keeping supply increases from overwhelming demand, US shale continuing to face constraints preventing significant increases and Iran not coming to full production any time soon (Trump will keep policy as is and making nice with Iran is unlikely to be Job #1 for Biden), crude markets should tighten into 2021. Indeed, we believe that crude moves well above the current $42/bbl resistance, once both demand and supply positive expectations are confirmed by the facts on the ground.”