WTI Futures Gain on Stimulus Hopes, Expected Crude Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- In afternoon trade Tuesday, oil and refined product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pushed higher in concert with rallying equities and a falling U.S. Dollar Index after House Speaker Nancy Pelosi indicated a stimulus deal for the battered U.S. economy is possible by day's end, with House Democrats and Senate Republicans reportedly bridging the fiscal gap in their respective proposals.

With a self-imposed deadline quickly approaching, Pelosi rushed to calm the markets on Tuesday, indicating a deal could be reached before the elections to deliver aid to the most vulnerable American households.

"I think there could be more COVID-related aid before the elections," said Pelosi.

The issue at stake is both the size and design of the fiscal package, with Democrats pushing for a $2.2 trillion plan which will include aid to state and local governments, while the Republican-controlled Senate is offering a $500 billion relief package. Senate Majority Leader Mitch McConnell said Tuesday, however, he would consider a larger coronavirus deal if one is reached between the White House and the Speaker of the House. U.S. President Donald Trump on Monday lifted his offer to $1.9 trillion to narrow the gap between Republicans and Democrats. The situation remains fluid.

Stimulus talks offset heightening concern over oil demand in the fourth quarter, which came in renewed focus this week over rising coronavirus infections in the European Union and parts of the United States. A second wave of infections prompted Ireland, Wales and the Lombardy region of Italy to reintroduce sweeping lockdowns to halt the spread of the infections this week, ordering residents to refrain from all nonessential travel and reclosing businesses. Even though these regions do not represent the core economies of the Eurozone, they clearly point to a quickly escalating public health crisis across the entire block.

So far, Ireland and Wales have the strictest quarantine measures introduced since "the great lockdown" of March-April when global oil demand collapsed 30% as economic activity and personal mobility were brought to a virtual standstill.

The possibility of more stimulus ahead of the presidential election pushed oil futures to their intraday highs ahead of weekly inventory data set for release by the American Petroleum Institute at 4:30 p.m. EDT, with expectations that U.S. crude and product stocks were drawn down last week due to the lingering effects of Hurricane Delta which forced nearly all oil production in the Gulf of Mexico to shut-in and disrupted refinery operations in Texas and Louisiana.

Commercial crude oil stocks are expected to have dropped 4.3 million barrels (bbl) in the week ended Oct. 16, while gasoline inventories are estimated to have declined 1.8 million bbl. Distillate inventories likely decreased 2.3 million bbl after plunging 7.2 million bbl during the previous week.

On the session, November West Texas Intermediate futures expired 63 cents higher at $41.46 bbl, with the December contract settling at $41.64 bbl. The December Brent contract on ICE advanced 54 cents to $43.16 bbl. NYMEX November ULSD futures firmed 1.54 cents to $1.1735 gallon at settlement and November RBOB futures settled 2.56 cents higher at $1.1879 gallon.

The U.S. dollar weakened 0.4% against a basket of six global currencies to 93.055 late afternoon, lending support for WTI futures.

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

Liubov Georges