Brent at 1-Year High as Eurozone GDP Fell Less Than Expected

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and on the Intercontinental Exchange extended their recent gains into early trade Tuesday, with the international crude benchmark rallying to the highest trade since February 2020 after eurozone's economy contracted less than expected during the fourth quarter of last year despite pandemic-induced lockdowns, with the bloc's largest manufacturing economies, Germany, Netherlands and France, seen sustaining expansion in early 2021.

The European Union's statistics office Eurostat said Tuesday morning gross domestic product in the 19-nation economic bloc fell by 0.7% in the fourth quarter 2020, following a 12.6% expansion in the third quarter. While still in jeopardy of falling into a double-dip recession, the decline in eurozone's economic output during the October-December period was less than an expected 1.7% quarterly decline. The relative strength in German, Dutch and French manufacturing sectors has offset some of the economic damage from otherwise demand-sapping lockdowns and painfully slow rollout of the vaccine efforts.

Germany's Manufacturing Purchasing Manager's Index grew for the seventh consecutive month in January to a reading of 57.1, with the expansion largely driven by strong export orders. Unlike the lockdowns in spring 2020 when the global economy contracted by more than 20%, the world outside the European Union remains largely open, meaning continued demand for export-oriented manufacturing economies like Germany and France.

Market sentiment was also boosted by what could be a key turning point in the fight against the coronavirus pandemic. Data from the Centers for Disease Control and Prevention showed that around 26.1 million people in the United States have received at least one dose of one of the two approved vaccines, a figure that essentially matches the number of Americans who have tested positive for the virus.

The United States is currently administering 1.34 million doses per day, with President Joe Biden calling for the daily rate to pick up pace to 1.5 million doses by the spring.

A fiscal stimulus deal on Capitol Hill showed signs of bipartisan support after Biden agreed to discuss a counteroffer by Republicans for a smaller fiscal package that targets lower-income households -- arguably the subset of the public hardest hit by pandemic-induced job losses. On Monday, ten Republican lawmakers unveiled a $618 billion coronavirus rescue proposal, which includes funding for schools, small businesses and COVID-19 testing but lowers the income cap for a new stimulus check to $40,000 a year compared with Biden's proposal of $75,000 a year. The plan also calls for extending federal unemployment benefits through June 30. Democratic leaders in Congress, however, pushed for a deeper $1.9 trillion stimulus package, which includes federal aid to the states and local governments as well as a larger $1,400 individual check for most Americans.

Near 7:45 a.m. ET, West Texas Intermediate futures for March delivery advanced 1.30 cents to $54.85 per barrel (bbl), while International crude benchmark Brent April contact on ICE surged 1.36 cents to trade near a one-year high $57.71 bbl. The March ULSD contract on NYMEX added 3.48 cents or 2% to $1.6469 gallon and NYMEX RBOB March futures surged 4.57 cents to near $1.6355 gallon.

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

Liubov Georges