By Sonali Paul
MELBOURNE, Nov 5 (Reuters) - U.S. oil prices fell in early
trade on Thursday as the dollar strengthened on expectations the
Republican Party would keep control of the Senate following the
U.S. election, holding back any huge COVID-19 relief package.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
dropped 29 cents, or 0.7%, to $38.86 a barrel at 0042 GMT.
Brent crude LCOc1 futures had yet to start trading. Both
benchmark contracts jumped around 4% on Wednesday.
"The volatility in oil will remain because of its
sensitivity to the U.S. dollar. And the U.S. dollar will remain
volatile for at least the next few days as the U.S. election
still has to be worked out," said Commonwealth Bank commodities
analyst Vivek Dhar.
Oil prices generally fall as the U.S. dollar rises as crude
priced in dollars becomes more pricey for foreign buyers.
Democrat Joe Biden said on Wednesday he was headed toward
victory over President Donald Trump after claiming the crucial
Midwestern states of Wisconsin and Michigan, while Trump's side
opened a multi-pronged attack on vote counts through the courts.
However, even if Biden wins the U.S. presidency, current
vote counting suggests the Republicans will retain control of
the Senate. That would result in a divided Congress that would
likely prevent Biden from enacting major priorities like
expanding healthcare, fighting climate change and providing aid
to millions whose lives have been upended by the coronavirus.
Oil prices surged on Wednesday on growing expectations that
the Organization of the Petroleum Exporting Countries and its
allies, together called OPEC+, would hold off on bringing back 2
million barrels per day of supply in January with demand sapped
by new COVID-19 lockdowns.
The market also was buoyed on Wednesday by a larger than
expected drop in U.S crude stockpiles, although that was partly
due to short-lived production halts in the U.S. Gulf of Mexico
ahead of Hurricane Zeta.
Analysts said U.S. inventory data was not all positive, with
gasoline inventories having risen by 1.5 million barrels,
against analysts' expectations for a drawdown. EIA/S
At the same time, average highway use in France, Italy and
Spain has dropped to its lowest level since late June, "which
doesn't bode well for gasoline demand," ANZ Research said.
"This is likely to put pressure on the OPEC+ alliance to
delay its planned rise in output in January," ANZ Research said.
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