Crude stockpiles fell by 8 million barrels last week to about 487 million barrels, the American Petroleum Institute showed on Tuesday. Image Credit: Reuters

TOKYO: US oil prices jumped more than 2% on Wednesday after industry data showed crude inventories in the United States dropped sharply and as investors awaited results from the tumultuous presidential election. West Texas Intermediate was up $1.01, or 2.7%, at $38.67 a barrel by 1138 GMT Tuesday, after gaining more than 2% in the previous session. Brent crude was yet to trade, having gained 3% on Tuesday.

Oil prices dropped more than 10% last week with rising coronavirus cases around the world and more restrictions on movement hitting demand prospects. US oil has nearly recouped those losses in three days of gains this week in the run-up to the election. Still, "the market is ... cautious heading into the US presidential election," ANZ Research said in a note.

"The two contenders have significantly different energy policy platforms, which could impact the crude oil demand," ANZ said. "We expect a Biden victory to weigh on crude prices in the medium term," referring to U.S. Democratic challenger Joe Biden.

U.S. crude oil stocks fell sharply last week while gasoline inventories rose, data from industry group the American Petroleum Institute showed on Tuesday. Crude stockpiles fell by 8 million barrels last week to about 487 million barrels, the American Petroleum Institute showed on Tuesday.

US stock futures edge up before election result

US stock futures gained and the dollar extended its decline as investors awaited the outcome of the presidential election, with the first polls closing in Indiana and Kentucky.

Earlier, US stocks capped their biggest two-day rally since September and Treasury yields rose on speculation that Congress will deliver a spending bill once the election is decided. Asian futures pointed to a mixed start to trading Wednesday. Democratic nominee Joe Biden leads President Donald Trump in the final polls, with some investors speculating his victory would bring a surge in federal spending. Treasuries fell and a gauge of the dollar dropped the most in more than three weeks. Oil extended Monday's gains.

Investors are bracing for the outcome of a divisive election following weeks of speculation that a contested result could roil markets. Polls continue to indicate that Biden is ahead, though the race looks tight in some battleground states, some of which are seeing virus cases soar.

"It's a reflection of the market's belief there is not going to be a whole lot of uncertainty after election day," said Matt Stucky, portfolio manager for equities at Northwestern Mutual Wealth Management Co. "The worst outcome for election day is a really uncertain winner scenario where it's going to take weeks and a lot of legal back and forth before the decision is ultimately made."

While trades reflecting a Democratic sweep held firm, betting markets aren't convinced. One gauge slipped to just over 50% odds of the so-called Blue Wave - that Democrats oust President Trump and take Congressional majorities. Traders hedged prospects of post-vote volatility, driving a measure of expected swings in China's yuan to its highest level in more than nine years.

"I don't think the market has priced in the uncertainty and volatility that we may face finishing up this election," Christopher Ailman, chief investment officer of the California State Teachers' Retirement System (CalSTRS), said on Bloomberg TV. "Longer term the market is in a good place, but right now I am very cautious."