Oil prices rose on Wednesday but pared earlier gains after President Donald Trump falsely claimed victory in a tight U.S. election with millions of votes still to be counted and the final result not yet clear.
A victory by Trump is viewed as bullish for oil because of sanctions on Iran and his support for Saudi-led oil production cuts to support prices.
A contested result and prolonged uncertainty is seen as the most bearish outcome for oil and markets in general, while a win for Joe Biden would be seen as bearish to neutral because of his support for green policies and softer stance on Iran.
West Texas Intermediate was up 40 cents, or 1%, at $38.06 a barrel by 1442 GMT. It earlier reached highs of $38.92.
Brent crude was up by 51 cents, or 1.3%, at $40.22 after hitting highs of $40.97.
Trump falsely claimed to have won after his Democratic challenger Biden said he was confident of winning a contest that will not be resolved until a handful of states finish vote counts in the next hours or days.
"This (potential Trump victory) is bullish for oil as OPEC+ can keep cutting without fear that Iranian oil supply will come back into the market any time soon," said Bjarne Schieldrop at SEB.
Investors moved to price in a greater chance of U.S. policy gridlock, with U.S. Treasuries and the dollar strengthening and technology shares soaring. [MKTS/GLOB]
Oil prices were also supported by the possibility that OPEC producers and Russia could consider deferring a planned increase in OPEC+ oil output from January as a second coronavirus wave stifles a recovery in fuel demand.
The Organization of the Petroleum Exporting Countries (OPEC)and allies led by Russia, a grouping known as OPEC+, earlier agreed to ease cuts by 2 million barrels per day from the current 7.7 million bpd from January.
More lockdowns could cap oil price gains. Italy, Norway and Hungary have tightened coronavirus curbs, following Britain, France and other countries.
Graphic: Global oil supply and demand -