Oil Futures Gain in Risk-On Trade Spurred by New Stimulus

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange reversed higher in early trade Tuesday, with both crude benchmarks up by more than 1% on the back of a weakening U.S. Dollar Index after the House of Representatives passed a bill boosting stimulus checks for Americans to $2,000 in coronavirus relief legislation signed by U.S. President Donald Trump Sunday night.

The U.S. Dollar Index dropped back, falling below the 90-level in overnight trading as currency traders anticipate a growing debt load after the House approved the bill that would increase individual checks to Americans by $1,400 from the current $600 -- a proposal lobbied for by Trump that nearly derailed the $897 billion coronavirus relief package. It remains unclear if the Republican-controlled Senate would bring the bill up for a vote, with the current legislative session ending Jan. 2, 2021.

Buoyed by risk-on sentiment, U.S. equities are positioning to retest record highs on Tuesday, with contracts tied to Dow Jones Industrials looking to notch a 130-point gain and S&P 500 Index traded up more than 0.5% at last look. All major indexes closed at record highs on Monday.

In early trading, NYMEX February West Texas Intermediate futures were up $0.61 at $48.23 per barrel (bbl), with ICE February Brent advancing alike amount to trade near $51.47 bbl. February Brent expires Wednesday, with the March contract trading near parity with February delivery. NYMEX January ULSD futures gained 1.66 cents at $1.4956 gallon ahead of expiration Thursday, with the February contract trading at a 0.13 cents premium. NYMEX January RBOB futures added 1.32 cents to $1.3809 gallon ahead of expiration later this week, with February delivery at a 64-cent contango.

Oil futures' move higher also follows recent data from the Transportation Security Administration showing nearly 1.3 million passengers passed through the U.S. airports on Sunday, the highest number since the pandemic grounded air travel nearly 10 months ago.

Despite repeated warnings from the Centers for Disease Control and Prevention for Americans to refrain from travel, Sunday was the sixth day of the Christmas holiday rush to see screenings exceed one million a day. This trend, however, gives ground for health officials to believe the country would see a fresh surge in new infections and virus-related deaths after Christmas and New Year's celebrations that will pressure already lackluster gasoline demand by the world's largest oil consumer.

Apple mobility data shows U.S. driving activity during the week ended Dec. 25 was the weakest since Easter Sunday on April 12, down nearly 3% from the week prior. Although, a sharp drop-off in driving during major holidays is not unusual in the United States, implied demand for gasoline this year has already been lagging some 12% below 2019 levels that could pressure the RBOB contact heading into the final days of December.

U.S. gasoline stockpiles are expected to have built by 2.3 million bbl during the week ended Dec. 25 to around 240 million bbl, according to analysts surveyed by Platts. American Petroleum Institute will release preliminary inventory data for the holiday-shortened week at 4:30 p.m. ET, followed by official data from the Energy Information Administration at 10:30 a.m. ET on Wednesday.

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

Liubov Georges