Crude oil prices moved higher in early Monday trading after verbal stimulus from OPEC emerged on the eve of the U.S. presidential election.
Members of the Organization of Petroleum Exporting Countries during a September meeting in Algeria proposed a production ceiling aimed at propping up oil prices in a market characterized by excessive supplies. Kuwait’s prime minister said Monday his government supported the deal and OPEC Secretary General Mohammad Sanusi Barkindo said support was consolidating around the proposal.
According to OPEC, Kuwait’s acting oil minister “reaffirmed the efficacy of the informal consultations in forging a common understanding among OPEC member countries as well as other producers to jointly restore balance in the market.”
Crude oil prices moved past $50 per barrel in the sessions that followed the September proposal and have reacted positively to most of the statements offered in support of the so-called Algiers Accord.
The price for Brent crude oil moved up 0.8 percent to open the trading day in New York at $45.96 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, gained 1 percent from the previous close to start the day at $44.54 per barrel.
Doubts over whether or not the 14 members of OPEC could coordinate on a formal agreement dragged oil back beneath $50 per barrel and most metrics show OPEC would actually need to cut output to meet the terms of the September proposal.
A research note published during the weekend from Morgan Stanley said lip service alone from OPEC has been enough to influence the markets.
“Poor fundamentals don’t prevent headline-related price reversals, and OPEC can still spook markets with its rhetoric,” it said.
Oil prices may be moving in response to the latest trends in the U.S. presidential race with polls showing Democrat Hillary Clinton with an advantage one day before Election Day. Analysis emailed from S&P Global Platts suggested that, from a market standpoint, some energy prices would likely move lower if scales tilted toward Republican Donald Trump because of his support for more oil and gas production.
The rise of U.S. oil production in part from shale deposits in the Lower 48 brought oil down from $100 per barrel two years ago. Crude oil markets suffered one of their worst trading days in recent years last week after U.S. federal data showed a spike in domestic oil supplies.