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WEEK AHEAD: OCTOBER 19

Short Description

It’s the final presidential debate between President Donald Trump and Former VP Joe Biden and it could have big implications for who wins the election and for financial markets – including the price of oil- and I also rundown the economic calendar. Thanks! Rich

Video Script

Trading oil before the final presidential debate - THE WEEK AHEAD (Oct 19 - 23, 2020)

Hi everyone, I’m previewing the week ahead and it promises to be a big one with the final debate between Trump and Biden before the US election as well as third quarter GDP figures from China. I’ll discuss what these mean for markets – specifically the oil price - as well as rundown highlights from the week’s economic calendar.

I’ll talk about oil in reference to the United States politics in a minute – but did you know the US has only the ninth biggest known oil RESERVES in the world? Venezuela has the highest, which together with Saudi Arabia have a third of global oil reserves in their countries.

If you know a little bit more now about where the petrol in your car is coming from, please click the like button - it really helps us spread the word about these videos!

As far as the economic calendar goes, its very China-centric to start the week. We have third quarter GDP as well as September retail sales and industrial production released on Monday. Economic growth is expected to have accelerated to over 5% in Q3 from 3.2% in Q2. On Tuesday the People’s Bank of China set interest rates. On Wednesday its UK inflation, retail sales in Canada and the Fed’s Beige book. On Thursday consumer confidence in Germany for the coming month will be an important sentiment indicator to watch given the rising virus cases in Europe. Then late Thursday in the US and early Friday in the rest of the world we have the presidential debate. Then later Friday it is UK retail sales and October preliminary PMI data from Europe and the US.

So especially as we head into the election- oil is very much a political issue. The United States became the biggest oil producer in the world under Republicans and Trump but Biden and Democrats believe in a Green New Deal that relies on renewable energy. What we can deduce from this is that oil production in the USA is likely to be lower under a Biden Presidency. Higher supply from the US, all else being equal, is positive for oil prices. Now this is politics after all and we don’t know how green and anti-fossil fuels Biden will be but we do know that he was Vice President under Obama, who did block the keystone XL oil pipeline from Canada being built - under Trump the pipeline went ahead. 

Now while Biden may suppress US oil production- interestingly he will likely allow much more Iranian oil production. President Obama and VP Joe Biden oversaw the Iran Nuclear Deal, which in effect forced Iran to stop efforts to build nuclear weapons in order to lift sanctions on their oil output. Biden has said he would bring the deal back into effect if he were President after the Trump White House added sanctions back onto Iran. Higher Iranian supply under Biden is negative for the price of oil.

So which one is more important for the oil price? For what it’s worth Goldman Sachs predicts that the reduced shale oil output in the US would offset the increased Iranian output under Biden- and super ceding both of these supply issues is that oil demand should recover from the pandemic shock of 2020. Others argue that in the long run Biden would try to bring the US back into the Paris Climate Accord, and that would dampen demand for fossil fuels. Anyway, this week I’ve got my eye on $41 in WTI and $43 in Brent for any chance of an upwards break in oil prices.

Right thanks everyone, good luck trading and make sure to subscribe to our channel so you don’t miss the next video.
 

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