Crude Oil Volatility To Surge On FOMC Decision, US Presidential Election?

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CRUDE OIL FUNDAMENTAL OUTLOOK: NEUTRAL

  • Crude oil price volatility may surge ahead of highly-anticipated US presidential race
  • Oscillations may be amplified following the FOMC rate decision and their forecasts
  • Concern about the future and possibility of fiscal stimulus also hangs in the balance

US PRESIDENTIAL ELECTION: WHO WILL WIN?

Arguably the biggest geopolitical risk this year – apart from the attack on the Saudi Arabian Aramco oil-processing facility – is the US presidential election. The character of it is volatile by nature. This is not just due to the various controversies that have followed each candidate but also because of the vastly different implications for the global economy each new administration would imprint.

Former Vice President and Democratic nominee Joe Biden has lead in the polls with approximately a 7-point average over the incumbent President Donald Trump over the past few months. The former’s popularity surged while Mr. Trump’s plummeted after the first presidential debate and Mr. Trump’s subsequent diagnosis with the coronavirus.

Given the comparatively more uncertainty that Mr. Trump would likely bring if he were re-elected, his ascent to the White House could sour sentiment. This in large part has to do with the economic implications of his policies, specifically as they relate to trade. The spats with China and the EU undermined economic growth in 2019, which made the US more vulnerable to the downturn that ensued after the virus outbreak.

Throughout those years, crude oil prices fell despite deep OPEC supply cuts and heightened geopolitical tension that raised the prospect of supply-disruptions. Despite these risks, crude oil fell and was ultimately submissive to the force of fundamentals. With these premonitions in mind, crude oil may then fall if he is elected for another four years.

CRUDE OIL – DAILY CHART

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