WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange pushed higher in afternoon trade Tuesday, with the prompt-month West Texas Intermediate contract advancing to $53 per barrel (bbl). Futures were bolstered by a weakening U.S. dollar and surging equities after Janet Yellen, President-elect Joe Biden's designated nominee for Treasury Secretary, pushed the U.S. Congress to "go big" on the relief package to lift an economy in which many Americans are suffering from pandemic-induced business and job losses.
"Neither the president-elect, nor I, propose this relief package without an appreciation for the country's debt burden. But, right now, with interest rates at historic lows, the smartest thing we can do is act big," Yellen said during Tuesday's testimony in front of the Senate Finance Committee.
Yellen, who as the newly appointed Treasury Secretary awaits Senate confirmation, was calling on U.S. lawmakers to approve Biden's plan for a $1.9 trillion rescue package that includes a $1,400 check to eligible Americans, funding for states and local governments and extension of unemployment benefits among other proposals. The fiscal stimulus would arguably boost consumer discretionary spending and energy demand, while ballooning already massive national debt that risks raising inflation later in the year. Several Federal Reserve officials last week suggested inflation is already on an uptrend and that the economy might be on shaky ground as demand returns after pandemic begins to recede.
Yellen pushed back.
"Economists don't always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now -- and long-term scarring of the economy later," Yellen said Tuesday, according to her prepared remarks.
Following her remarks, U.S. equities powered higher and the dollar dropped back 0.3% against global currencies to finish at 90.476.
NYMEX February WTI futures advanced 62 cents to $52.98 per bbl, with the next-month delivery WTI contract settling at parity ahead of the February contract's expiration Wednesday afternoon. March Brent contract on ICE surged $1.15 to $55.90 per bbl. NYMEX February ULSD futures posted modest gains in afternoon trade to settle at $1.5987 per gallon, with February RBOB futures climbing nearly 1 cent to a $1.5381-per-gallon settlement.
Tuesday's higher settlement followed a somber forecast from the International Energy Agency Tuesday morning, with the agency downgrading its demand outlook for the first quarter, citing the resurgence of coronavirus variants and renewed lockdowns in several countries. IEA cut 600,000 barrels per day (bpd) from its first-quarter forecast and 200,000 bpd from its 2021 outlook, projecting annualized growth of 5.5 million bpd to 96.6 million bpd this year. The agency does expect global oil demand to pick up pace in the second half of the year spurred by widespread vaccination efforts and stronger economic growth.
"The global vaccine rollout is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020's unprecedented collapse" said IEA.
On the supply side, IEA estimates global oil stocks fell 2.58 million bpd in the fourth quarter 2020 after preliminary data showed hefty drawdowns towards year-end. In November 2020, industry stocks held by Organization for Economic Cooperation and Development countries fell for a fourth consecutive month, drawn down 23.6 million bbl in November to leave OECD inventory at 3.108 billion bbl, 166.7 million bbl above their five-year average.
Liubov Georges can be reached at email@example.com