Oil rose for a fifth straight week with support from an OPEC+ deal and hopes for another round of US stimulus.
Futures in New York and London on Friday closed at fresh nine-month highs, with signs that momentum is building toward a US fiscal stimulus plan that could provide an immediate demand boost, before a vaccine is widely available.
West Texas Intermediate for December delivery rose 1.36 percent to US$46.09 a barrel, up 1.23 percent from a week earlier.
Photo: EPA-EFE
Brent crude for December delivery increased 1.11 percent to US$49.25 a barrel, up 2.22 percent on the week.
Prices had already been rising after OPEC+ reached a compromise agreement that offers something for members concerned about the fragility of the market, as well as nations that want to pump more to take advantage of higher prices.
The agreement involves adding 500,000 barrels a day of production to the market next month, and then holding monthly meetings to decide on subsequent moves.
“At the beginning of the week, there was a sense that there would be no stimulus, and now it looks like there will at least be some limited aid and enough to make a difference in the US,” Strategic Energy & Economic Research president Michael Lynch said.
Meanwhile, “OPEC+ members seem to be sticking to the idea of keeping production down,” even if the decision was not what had widely been expected, he said.
Oil has recently reached the highest levels since March amid optimism over an impending COVID-19 vaccine lifting demand next year.
Alongside the rally in headline crude prices, the oil futures curve is signaling tighter supply as demand in Asia booms and the key North Sea market strengthens.
The prompt timespread for Brent crude moved back into backwardation this week, while the nearest December contract is trading at a higher level than the same contract for December 2022.
“The fact that Asian countries have been coming out of this situation for several months, that’s been the one bright spot,” said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC.
While Democrats and Republicans have been at an impasse for months over another round of US fiscal stimulus, signs of progress have led broader markets to rally heading into the weekend.
US House of Representatives Speaker Nancy Pelosi said that she and US Senate Majority Leader Mitch McConnell have discussed attaching the relief measures to an omnibus spending bill that the parties are working on separately to keep the government funded beyond Dec. 11 into next year.
Meanwhile, the rally in headline crude prices is not a welcome sign for every corner of the market. Europe’s beleaguered oil refineries are struggling to pass on the higher cost to buyers as they face weak fuel demand due to the pandemic.
In the US, the combined refining margin for gasoline and diesel remains near US$9 a barrel at its lowest in about a decade for this time of year.
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