Oil Futures Gain for Third Day as Market Looks to Recovery

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- For the third session, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced, continuing to notch gains following Tuesday's surprise announcement that Saudi Arabia will cut oil production by one million barrels per day (bpd) in February and March, while better than expected unemployment and service sector readings joined supportive news from Moderna regarding its COVID-19 mRNA vaccine to lift prices.

Thursday's advance was modest, although ULSD and the crude contracts traded at fresh, better-than-10-month highs while the RBOB contract held to inside trade, with a stronger U.S. dollar capping the upside for West Texas Intermediate. Equities also posted sharp gains, as the market looks to increased stimulus now that both chambers of Congress along with the presidency will be in Democratic hands.

NYMEX February WTI futures settled up $0.20 at $50.83 barrel (bbl) after trading at a $51.28 high, with ICE March Brent eking out an $0.08 gain for a $54.38 bbl settlement, paring an advance to $54.90 bbl. February ULSD futures settled 0.94 cents higher at $1.5381 gallon after trading at $1.5501 earlier during the session, with February RBOB futures up 0.77 cents with a $1.4827 gallon settlement.

Calmness fell upon the nation's capital Thursday following Wednesday's mayhem when a mob broke into the rotunda, although rhetoric was heated over U.S. President Donald Trump's role that was seen inciting the violence. House Majority leader Nancy Pelosi and soon to be Senate Majority leader Chuck Schumer have both called on U.S. Vice President Mike Pence to invoke the 25th amendment and remove Trump as president immediately, and ahead of the Jan. 20 inauguration of Joe Biden as the 46th president. Citing Wednesday's violence and Trump's rousing oratory ahead of the break in, Transportation Secretary Elaine Chao, wife of Senate Majority leader Mitch McConnell, resigned her cabinet position in protest.

The violence was largely overlooked by markets and instead focused on expectations for an improving U.S. economy in the months ahead as vaccination efforts continue. Moderna CEO Stephane Bancel on Thursday said his company's vaccine should provide protection from coronavirus for a couple of years. Bancel also indicated his company would prove that its vaccination is effective against the new coronavirus variant that has torn through the United Kingdom. On Wednesday, the European Commission approved Moderna's vaccine.

Atop the hopeful news, U.S. Institute of Supply Management on Thursday morning reported its Services Sector Index jumped 1.3% to 57.2% in December against expectations for a 1.3% decline, marking the seventh consecutive month of growth for the sector. While respondents to the ISM survey said conditions were mixed and local and state level restrictions due to COVID-19 continue to harm the sector, there was guarded optimism over last month's vaccine approvals.

Initial unemployment insurance filings declined by 3,000 during the week ended Jan. 2 to 787,000, contrasting with expectations for an increase to 803,000 -- the second straight week the Labor Department reported first-time filings below 800,000. The Labor Department Friday morning will release its nonfarm payroll report that's expected to show a modest 68,000 increase in new jobs for December however, as rising COVID-19 infections prompt restrictions on nonessential businesses in parts of the country.

Schumer late Wednesday said the Senate's first order of business after the inauguration would be passing legislation for $2,000 stimulus checks, although offered no details on the plan. In late December, Congress agreed to $600 stimulus payments to individuals, with a Republican controlled Senate voting down proposals to expand relief payments to $2,000.

Brian L. Milne can be reached at brian.milne@dtn.com

Brian Milne