WTI Futures Rise on US Stimulus Progress

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange added to gains in early trade Tuesday, underpinned by surging equities and a weaker U.S. dollar after President Trump suggested a capital gains tax cut as a new stimulus measure for the battered U.S. economy and lawmakers on Capitol Hill attempt to restart stalled talks over more than $1 trillion in coronavirus relief.

Overnight data out of China further boosted sentiment across the markets, suggesting demand is rebounding in the world's second largest economy. China's Association of Automobile Manufacturers reported auto sales last month surged as much as 16.4% year on year after growing steadily for three months in a row. This trend correlates closely with boosted traffic volumes in major metropolitan areas as drivers increasingly opt out of using public transportation. Cities like Beijing and Shanghai among others are reporting higher traffic congestion than prior to pandemic.

The Oil complex also got a boost from the latest data from the Transportation Security Administration showing airport screening last week hit its highest level since mid-March at 831,789 while also marking a second weekly gain. This is still more than 30% below levels this time last year but marks a significant improvement.

Meanwhile, U.S. airlines reported a better than 90% increase in scheduled flights in June versus May, although still down 80% from last year's levels, preliminary data from the Bureau of Transportation Statistics show. Jet fuel demand has been hammered by the coronavirus pandemic and so far has been slow to recover compared to motor gasoline. Energy Information Administration estimates consumption of jet fuel by commercial passenger flights averaged 1.6 million bpd during the first two weeks of July, 69% less than the level one year ago.

In broader markets, U.S. equities opened Tuesday's session with solid gains and the greenback slumped 0.14% to 93.425 against the global peers after U.S. President taunted the idea of capital gains tax cut as a new stimulus measure. That follows a string of executive actions signed over the weekend, which includes extension of the moratorium on evictions, $400 in weekly supplemental unemployment aid and deferral of payroll tax for U.S. businesses. "Fiscal policy has been unbelievably important in supporting the economy. It continues to be important because we have not got control over the virus spread. Another supportive package is really important," said Chicago Fed President Charles Evans on Monday. White House officials and top Democratic lawmakers on Monday indicated they were ready to resume talks on a coronavirus aid package.

Near 9:30 a.m. ET, West Texas Intermediate futures for September delivery gained 75 cents to $42.71 per barrel (bbl) and the spot month international Brent crude contract moved up 59 cents to $45.58 bbl. NYMEX ULSD September futures advanced 2.32 cents to $1.2602 gallon and front-month RBOB futures gained 2.06 cents to trade at better-than-two week high $1.2489 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges