Oil prices dropped on Thursday morning as a highly contested presidential election continued to be too close to call as of 11 a.m. ET, although Democratic candidate Joe Biden was within six electoral votes to win.

As of 11:37 a.m. ET on Thursday, WTI Crude was down 1.53 percent at $38.47, and Brent Crude was trading down 1.50 percent at $40.74, as Biden was in the lead in electoral votes over President Donald Trump.

A Trump win would be more bullish for oil, analysts say, because of the President’s continued pro-oil policies. Biden, on the other hand, has said he would seek a path of diplomacy toward Iran, which could potentially bring Iranian barrels back to the oil market at some point next year under a Biden Administration.

Yet, a President Biden would not be as bad for oil prices as it would look on the face of it, analysts say. First, they expect a weaker U.S. dollar, which typically boosts oil prices because crude becomes cheaper for holders of other currencies. In addition, Republicans are set to keep the majority in the Senate while Democrats have lost a few seats in the House—this, according to analysts, would keep a President Biden from passing climate policies that could be too harsh on the oil industry.  

“A Trump win will likely to be bullish for oil, at least more bullish than under a Biden administration,” Tamas Varga at oil brokerage PVM told Reuters.

Oil prices jumped on Wednesday after the EIA reported an 8-million-barrel draw in crude oil inventories in the United States last week.

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This draw, a weaker U.S. dollar, and surging risk appetite after the ‘blue wave’ in the U.S. election failed to materialize, supported oil on Wednesday.

“However, with Biden on the brink of a narrow win, a continued surge in Covid-19 cases in Europe and the U.S. and rising production from Libya, the recovery stalled overnight with focus returning to what support OPEC+ can give at a time of weakening fundamentals. A delay to the January hike increasingly looks like a bare minimum,” John Hardy, Head of FX Strategy at Saxo Bank, said on Thursday.

By Tsvetana Paraskova for Oilprice.com

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