(Bloomberg) — Oil was steady near a 10-month high on optimism that a potential U.S. stimulus package may boost spending and lift fuel demand.
Futures in New York traded near $54 a barrel and are poised for the 10th weekly increase in eleven weeks. President-elect Joe Biden will ask Congress for $1.9 trillion to fund immediate relief for the coronavirus-wracked economy. The Covid-19 outbreak that eviscerated fuel consumption globally continues to spread rapidly in the U.S., even as states ramp up vaccination.
Worsening U.S.-China relations, meanwhile, are back in the spotlight after Washington blacklisted deepwater explorer China National Offshore Oil Corp. — known as CNOOC (NYSE:CEO) — for involvement in the disputed South China Sea.
Covid-19 vaccine breakthroughs and a recent pledge by Saudi Arabia to deepen output cuts has driven oil 50% higher since the end of October. Commodities are showing all the signs of a structural bull market, according to Goldman Sachs Group Inc (NYSE:GS)., and OPEC said in its monthly report on Thursday that the group was on track to deplete the world’s bloated crude inventories.
A resurgent virus across some regions, however, may cap further price gains. China is seeing rising cases again after largely containing the outbreak, while in Europe, France is extending tighter curfew measures and Germany is considering strengthening its lockdown.
“I think the market will take a bit of a pause to asses where things sit with so much going on,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group (OTC:ANZBY) Ltd. in Sydney. “There are plenty of risks at the moment, demand in the shorter term is clearly under pressure.”
Brent’s prompt timespread was 3 cents in backwardation on Thursday — a bullish market structure where near-dated prices are more expensive than later-dated ones — compared with 7 cents at the start of the week.
Biden’s pandemic package, which includes more than $1 trillion in direct relief spending, comes in at more than double the bipartisan bill approved last month. China, meanwhile, is forecast to report on Monday that its gross domestic product rose 2.1% in 2020 due to its success controlling the virus, the only major economy to have avoided a contraction.
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