Oil prices rose for the second consecutive day on Wednesday, as the market expects the new US administration to “act big” in the next COVID aid package.
As of 9:17 am ET on Wednesday, which is President-elect Joe Biden’s Inauguration Day, WTI Crude rose 1.53 percent to $ 53.77, and Brent Crude prices were trading above $ 56 a barrel – up 1.16 percent to $ 56.52, very close to the 11-month high prices hit last week.
The dollar fell after Treasury Secretary Janet Yellen’s nominee told the Senate Finance Committee on Tuesday that the United States should “act grandly” in the future stimulus package. The weaker dollar makes oil cheaper for holders of other currencies, while the general bullish sentiment in the market has also sent investors and speculators to riskier assets such as stocks and commodities.
On Wednesday, the market was looking beyond the scares of short-term oil demand, fueled by continuing blockages in many parts of Europe and now coming back in parts of China as well. On Tuesday, Germany extended its blockade until mid-February.
But market participants were looking beyond the first quarter, hopeful that a major stimulus package in the US would result in a recovery in the world’s largest economy, and aid packages in other economies will also help growth and, by extension, demand for oil, later year.
Although it cut its oil demand forecasts for the first quarter and 2021, the International Energy Agency (IEA) said in its Petroleum Market Report on Tuesday that “Much more oil is likely to be needed, given our forecast of a substantial improvement in demand in the second half of the year. “
“The market ignored another downturn in global demand growth from the International Energy Agency, which said that renewing blockages to contain the pandemic would weigh on consumption during the current quarter,” Saxo Bank said Wednesday morning.
“The market continues to be offered by a combination of Saudi production cuts and the prospect of more fiscal stimulus, greater mobility and continued monetary easing, eventually supporting demand. The biggest short-term risk is whether these have been fully assessed at the current price level, ”said the bank’s analysts.
By Tsvetana Paraskova for Oilprice.com
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