Oil Futures Climb on Stimulus Hopes

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Crude and refined product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange extended gains into afternoon trade Friday, with the front-month West Texas Intermediate contract settling above $46 per barrel (bbl). The gains came as traders raised their bets top lawmakers in Washington, D.C., would pass a new coronavirus relief package before the end of the year after November's nonfarm payroll report showed a sharp decrease in U.S. hiring.

The Bureau of Labor Statistics on Friday reported U.S. labor market added 245,000 new jobs in November, marking the slowest month of growth since the pandemic began nine months ago. The data also missed market expectations for 500,000 new positions and marks a sharp slowdown in hiring from October's 610,000, while the national unemployment rate edged 0.1% lower to 6.7%.

President-elect Joe Biden called the November jobs report "grim" while urging lawmakers in Washington to pass a relief bill by the end of this year, saying he would seek additional stimulus in 2021.

"The report shows an economy that is stalling. It confirms we remain in the midst of one of the worst economic and jobs crises in modern history," said Biden.

United States is now suffering an average of 189,000 new COVID-19 infections a day, up from fewer than 35,000 just three months ago. The breadth and severity of the virus resurgence triggered renewed quarantine restrictions across large U.S. states, with California Gov. Gavin Newsom reimposing "stay-at-home" orders amid limited bed capacity in intensive care units.

As the viral outbreak keeps worsening, top lawmakers on Capitol Hill appear to have stepped up efforts to deliver federal aid to individuals and businesses across the United States, with both House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell expressing a desire to quickly pass legislation, according to a senior aide to Pelosi.

Friday's gains were also underpinned by an agreement on production cuts between the Organization of the Petroleum Exporting Countries and Russia-led partners this week, which called for a gradual easing of those targets instead of a sudden 2 million-barrel-per-day (bpd) hike on Jan. 1, 2021. The 23-nation producer group agreed to ease output curbs in January by 500,000 bpd beginning in January with a month-by-month review of market conditions to determine if production adjustments are needed going forward, either allowing for more production or for an output cut that can be no more than 500,000 bpd.

The 500,000 bpd production increase OPEC and its partners are planning for January will be divided up proportionally, with Saudi Arabia and Russia, the two largest members, each allowed to pump 126,000 bpd more oil.

"This is a good decision as it allows us to stop and pause and review what needs to be done in order not to hurt the market," said Russia's Deputy Minister Alexander Novak who represents the country in negotiations with the cartel.

On the session, NYMEX January WTI crude futures gained 62 cents to settle at $46.26, and ICE February Brent futures added 54 cents to $49.25. NYMEX January ULSD futures gained nearly 1 cent to settle at $1.4030 per gallon, while the January RBOB contract advanced 0.68 cent to settle at $1.2685 per gallon.

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

Liubov Georges