NEW YORK: Oil rose 1% on Wednesday, buoyed by expectations that the incoming U.S. administration will deliver massive stimulus spending that will lift fuel demand and enact policies that will tighten crude supply.
Brent crude was up 53 cents, or 1%, at $56.43 a barrel at 11:24 a.m. EST (1624 GMT). U.S. West Texas Intermediate (WTI) crude climbed 44 cents, or 0.8%, to $53.06.
Joe Biden’s inauguration is on Wednesday, and the president-elect is expected to take measures to curb the U.S. oil industry, including re-entering the Paris Climate Agreement, cancelling a permit for the Keystone XL crude oil pipeline and pausing arctic drilling.
“I think the Biden administration on day one is making it clear that there’s a new sheriff in town and we’re going to go back to policies that are pro-green energy and anti-fossil fuels,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “It’s going to mean higher prices and the market is starting to price in that reality.”
U.S. Treasury Secretary nominee Janet Yellen on Tuesday urged lawmakers to “act big” on pandemic relief spending, which boosted oil prices. A fall in the dollar after the comments helped oil to rally, analysts said.
“Increased fiscal support means more growth and higher U.S. oil demand,” said Eugen Weinberg of Commerzbank. “What is more, the oil market is likely to remain in supply deficit both in the first quarter and in the year as a whole.”
A record output cut by OPEC and its allies, a group known as OPEC+, last year helped lift prices from historic lows.
This month Brent hit an 11-month high of $57.42, helped by Saudi Arabia pledging to make additional, voluntarily cuts and most OPEC+ members agreeing to keep output steady in February.
Oil drew more support from expectations of lower U.S. crude inventories. Analysts estimate crude stocks fell by 300,000 barrels in the week to Jan. 15. The first of the week’s two supply reports is due on Wednesday from the American Petroleum Institute.
Gains were limited by concern about near-term demand as COVID-19 infections rise.
China’s capital, Beijing, on Wednesday announced stricter COVID-19 control measures. Germany on Tuesday extended a lockdown for most shops and schools.
(Additional reporting by Alex Lawler in London, Sonali Paul in Melbourne and Shu Zhang in Singapore; Editing by Jason Neely and David Goodman)
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