The Daily Dose; US Oil Stock Draw Drives Rally

-Equities bet a Biden win would be offset by a GOP Senate.

-Will Tropical Storm Eta disrupt traffic in the Gulf of Mexico?

Crude oil prices followed equities higher in Wednesday trading as most people were glued to their televisions or social media feeds waiting for the results from the US presidential contest. The race as of 2:30 p.m. ET was too close to call, but tilting toward former US Vice President Joe Biden. A major draw on US crude oil inventories for last week added to the rally. Looking ahead, a premium could be developing as Tropical Storm Eta pivots east toward the mouth of the Gulf of Mexico. Demand in the US economy, however, remains suppressed so we wonder how long the bulls have to run.

Brent crude oil was up 3.65% as of 2:50 p.m ET to trade at $41.14 per barrel. US crude, meanwhile, looking to moving back into the tunnel established since mid-September.

As of this writing, there were no definitive results from the US presidential contest. President Donald Trump has called for a halt to the voting in some key battleground states such as Michigan as his margin eroded throughout the day. The Associated Press, CNN and CBS News all declared Biden the winner for Wisconsin, giving the former vice president a 248 to 214 edge in the Electoral College contest over Trump. To win, a candidate needs 270 votes in the Electoral College.

Equities were up sharply during Wednesday trading on hints that Biden might pull it off eventually. We’d have to wait until January, though a President Biden would almost certainly pass another round of federal stimulus to keep the economy going during the pandemic. If the Senate stays with the Republicans, that would limit Biden’s ability to raise corporate taxes are enact tight legislation on manufacturing, industries or the oil and gas sector, adding tailwinds to commodities.

In the oil state of Texas, the votes went decidedly toward the Republicans, though Tuesday night tallies made it look like a close race between Trump and Biden. Republican Jim Wright fought off a Democratic challenge to take a seat as the Texas Railroad Commission, the state body that regulates oil and gas. Texas has no federal lands, so Biden’s proposal on limiting drilling on federal lands would be moot.

Ed Longanecker, the president of the Texas Independent Producers & Royalty Owners Association, said in a statement emailed to The GERM Report that Texas still needs pro-growth policies.

“Maintaining a legislative and regulatory environment conducive to economic growth and opportunity is a key strength and differentiator for Texas and should be a topic that all policy leaders embrace and collaborate on for the benefit of our state and country,” the statement read. “The United States has proven that leading the world in oil and gas production, energy diversity and environmental stewardship are not mutually exclusive, thanks in large part to Texas.”

From the EIA, commercial crude oil inventories fell some 8 million barrels, though we’ve cautioned before about reading too much into that data because of the busy Atlantic hurricane season. Tropical Storm Eta, meanwhile, looks like it going to cut across the mouth of the Gulf of Mexico, possibly limiting traffic into the southern United States. Elsewhere, demand remains problematic. Total products supplied, a reflection of demand for gasoline and distillates, over the last four-week period is down 10.9% from this point last year.

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