Oil, Equities Mixed as Markets Eye Biden's Stimulus Plan

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange traded on either side of Wednesday's settlements in early trade Thursday, with the U.S. crude benchmark stalling near a 10-month high and U.S. dollar strengthening modestly on reports that President-elect Joe Biden could unveil a larger-than-expected $2 trillion spending plan later Thursday that is seen boosting a faltering recovery for the economy and fuel demand.

Near 7:30 a.m. ET, NYMEX West Texas Intermediate for February delivery slipped 20 cents to trade near $52.71 per barrel (bbl) and March Brent contract declined 33 cents to $55.73 bbl. NYMEX February ULSD futures were down 0.52 cents at $1.5937 gallon, with the front-month RBOB futures declining 1.29 cents to $1.5359 gallon.

U.S. dollar traded on either side of unchanged, firming slightly to 90.350 in index trade against a basket of foreign peers.

Overnight reports indicate Biden's administration is preparing to announce Thursday an ambitious larger-than-expected spending plan that could include a direct check for $2,000 to eligible Americans and an increase of minimum wage to a $15 an hour. Arguably, the large spending bill would boost consumer discretionary spending and energy demand, while adding trillions to the nation's swelling debt, devaluing the U.S. dollar.

Federal Reserve data released Wednesday showed U.S economic recovery faltered in the final months of 2020, with nearly one-third of the 12 federal districts reporting flat or declining business activity amid COVID-19 related shut-ins. The downturn in the labor market is of particular concern, with businesses in the hospitality and leisure sector accelerating layoffs. Weekly unemployment claims for the week-ended Jan. 9 to be released this morning are expected to tick higher to 790,000, with market consensus ranging from 790,000 to 835,000 first-time filers.

For signs of broader weakness in the U.S. economy investors will also be looking to December's retail sales on tap for release at 8:30 a.m. ET Friday that are expected to dip 0.1% after declining a larger-than-expected 1.1% in Nov. -- an unusual trend for the end of year holiday season.

Domestic gasoline use remains stubbornly below last year's levels, down 11% according to Energy Information Administration data, with the most recent implied weekly demand rate at 7.534 million barrels per day (bpd) -- the second lowest weekly rate since late March.

Separately, Organization of the Petroleum Exporting Countries revised slightly higher its global oil demand projections for 2020, mainly reflecting better-than-expected fuel consumption in China and India. In its December's Monthly Oil Market Report released Thursday morning, the 13-member cartel-maintained expectations for 2021 global oil demand to average at 95.9 million bpd. In countries that are part of the Organization for Economic Cooperation and Development, oil consumption is estimated to increase by 2.6 million bpd this year but will still lag pre-pandemic levels. Demand for OPEC crude in 2021 remains unchanged from the previous report to stand at 27.2 million bpd, around 5 million bpd higher than in 2020.

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

Liubov Georges