Oil Futures Again Rally on Expectations of More Stimulus

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

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures along with the international crude Brent contract on the Intercontinental Exchange for the fourth session traded at better than 10 month highs early Friday, continuing an advance on expectations for more federal stimulus in the United States, while COVID-19 vaccinations from Pfizer and BioNTech and Moderna are seen to provide protection against the new variant that spiked infections in the United Kingdom.

The ongoing rally comes ahead of U.S. jobs data, with the Labor Department this morning expected to report new 68,000 jobs were created in December, a sharp downshift from the 245,000 new jobs created in November. Eurozone unemployment rate ticked down 0.1% to 8.3% in November against an expected 8.5% reading for the month, data released this morning shows.

Markets are brushing aside slowing jobs growth, instead focused on more stimulus expected later this month after Democrats take control of the Senate and will now control both chambers of Congress and the presidency. Chuck Schumer who will become Senate Majority leader this month said the first order of business for the Senate will be passing legislation providing $2,000 checks to families. This follows $600 payments to individuals passed in legislation in late December.

Markets were also lent support from new developments on the vaccine front, that is seen allowing for a return to a new normalcy later this year. The COVID-19 vaccine developed jointly by Pfizer and BioNTech may provide protection against the new strain now spreading globally after ripping through the United Kingdom according to a new study by the University of Texas Medical Branch. The study joins comments from Moderna CEO Stephane Bancel on Thursday that the Cambridge, Mass. biotechnology company would prove that their COVID-19 vaccine would protect against the new variant, with Bancel indicating the vaccine once administered would likely provide protection for a couple of years. On Wednesday, the European Commission approved the Moderna vaccine.

The developments follow Thursday's grim reading in which deaths caused by the virus in the United States topped 4,000 for the first time, with John Hopkins University COVID-tracker reporting 365,346 deaths caused by COVID-19 in the U.S. while deaths globally moved above 1.9 million. U.S. hospitalizations also set a fresh Thursday at more than 132,000.

The economic impact of the second wave of COVID-19 continues to show up in macroeconomic reports, with industrial production activity in Europe's two largest countries slowing down in November, with output in France contracting, according to data released this morning. Still, Germany's industrial production activity increased a more-than-expected 0.9% in November, while down from an upwardly revised 3.4% gain in October, while France's industrial output shrunk 0.9% for the month from an upwardly revised 1.9% increase in October.

New manufacturing orders in Germany did increase 2.3% in November data released Thursday shows, while the Institute of Supply Management earlier this week reported an unexpected 3.2-point jump in U.S. manufacturing activity to 60.7 in December against an anticipated 1% decline.

In early trading, NYMEX February West Texas Intermediate futures were up $0.70 near $51.50 per barrel (bbl), with the March Brent contract on ICE gaining $0.80 to $55.20 bbl. NYMEX February ULSD futures were up 2.4 cents near $1.5625 gallon, with the RBOB contract advancing 2.2 cents to near $1.5050 gallon.

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

Brian Milne