Oil prices stayed firm at the third trading session of the week, amid high hopes that global oil stocks will fall back to a more normal range in 2021, coupled with U.S. lawmakers moving within striking distance of approving President Joe Biden’s $1.9 trillion COVID-19 aid bill.
At press time, U.S. West Texas Intermediate (WTI) futures were up by 0.2%, to $54.87 a barrel thereby recording a third straight day of gains.
Brent crude futures rose by 0.3%, to $57.62 a barrel, in a fourth straight day of gains after hitting $58.05 on Tuesday, its highest in more than 11 months.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on key macros happening at the world’s largest commodity derivatives market:
“Oil continues to strengthen today with Brent just shy of US$58 a barrel before profit-taking set in.
“Considerable activity in the physical market is behind the move and is pushing the backwardation further. Shell purchased five cargoes of North Sea oil yesterday in the Platts (10-minute) window and placed bids for seven more which remained unfilled. To put that in perspective, typically one or two cargoes trade in the 10-minute window.
“Demand in the physical market has been the driver of a strong front of the curve for this week fueled by news of OPEC+ production compliance at 99%. US vaccine rollout picking up steam in recent weeks are all getting framed as the Biden administration pushes for a colossal stimulus deal.”
What to expect: Oil traders are now anticipating that downside risk on oil prices will remain limited unless there is a material change in expectations for the duration of the pandemic’s impact on demand.