WTI Futures Rise as Crude Draw Seen, Progress on Stimulus

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange continued higher in afternoon trade Tuesday, bolstered by expectations for lawmakers on Capitol Hill to pass stimulus legislation before the end of the year. House Speaker Nancy Pelosi welcomed bipartisan talks on a smaller coronavirus aid package while the Federal Reserve will boost its asset purchasing program in a bid to shield the economy against a second wave of coronavirus infections.

At settlement, NYMEX January West Texas Intermediate contract advanced 63 cents to $47.62 barrel (bbl), and Brent crude for February delivery added 47 cents to finish at $50.76 bbl. The front-month ULSD contact gained 1 cent to $1.4644 gallon and January RBOB futures climbed 0.77 cent to $1.3268 gallon.

The U.S. Dollar Index sagged to finish at a 2 1/2 year low 90.465 as investors adjusted their expectations for more government funding and coronavirus relief after Pelosi invited both Republican and Democrat leaders for another round of stimulus talks. Pelosi's outreach came after a bipartisan group of lawmakers released a stimulus proposal that would split a previous plan for $908 billion aid into two parts. The new plan calls for $748 billion in spending for programs that are acceptable on both sides of the aisle, including an additional $300 per week in federal unemployment benefits and another $300 billion for more loans under the Paycheck Protection Program.

The Federal Open Market Committee began its 2-day policy meeting Tuesday, with investors anticipating the central bank to announce more debt purchases upon the meeting's conclusion. The short-term picture for the U.S. economy has deteriorated sharply since the FOMC last met in September as COVID-19 cases surged and local governments announced another round of shutdowns.

On Wednesday, the central bank will publish its latest forecast for the U.S. economy, with the last set of estimates calling for a 3.7% contraction in 2020, followed by a 4% rebound next year and the unemployment rate dropping to 5.5% by the end of 2021.

U.S. initial jobless claims have been pushing higher for a third week in a row through Dec. 12, with consensus calling for last week's change to climb to 808,000, with the wide range of expectations between 720,000 and 915,000.

With major economies taking another hit from the surge in COVID infections, the International Energy Agency on Tuesday morning downgraded its global oil demand projections for both 2020 and 2021, projecting weaker fuel consumption across countries that are part of the Organization for Economic Cooperation and Development.

For the fourth quarter, OECD oil demand is projected to be 5.3 million barrels per day (bpd) less compared to 2019, which brings the global demand estimate for the year to 91.2 million bpd, down 8.8 million bpd year-on-year. For 2021, the Paris-based agency downgraded its demand forecast by 170,000 bpd for annualized growth of 5.7 million bpd, driven by protracted weakness in the aviation sector and the delayed effect of vaccine programs in OECD countries.

Tuesday afternoon, oil traders positioned ahead of weekly inventory data from the American Petroleum Institute due out 4:30 p.m. EST, which will be followed by official data from the U.S. Energy Information Administration on Wednesday.

U.S. oil inventories are projected to have fallen by 2.7 million bbl in the week ended Dec. 11, with gasoline stockpiles expected to have risen by 1.4 million bbl from the previous week and distillate supplies expected to fall by 300,000 bbl from the previous week. Refinery run rates likely rose by 0.5% to 80.4% of capacity.

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

Liubov Georges