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Oil futures turned slightly higher Wednesday, as hopes built for progress toward another economic relief package from Washington and data from the U.S. government revealed a weekly decline in crude inventories.
The continued rollout of the U.S. COVID-19 vaccine to help restore economic growth also provided support, but recent forecasts for weaker demand limited oil’s price rise.
“Oil continues to draw support from hopes of a faster demand recovery as countries across the globe approve coronavirus vaccines,” said Lukman Otunuga, market analysis manager at FXTM. “Given how the largest economy in the world has joined the growing list of countries approving the vaccine for emergency use, the outlook for oil continues to brighten in the short term.”
He told MarketWatch that the “upside momentum” may propel U.S. benchmark futures prices toward $50 a barrel.
Meanwhile, efforts in the U.S. continued toward another round of economic relief as congressional leaders met face to face late Tuesday. A second round of stimulus checks, similar but smaller than the $1,200 ones doled out to most Americans in March, are a part of the emerging deal, according to Sen. John Thune, the second-ranking Republican in the Senate.
The U.S. fiscal stimulus bill, “if it gets passed…could have an impact going forward,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. But the COVID-19 vaccine “will take several months to have an impact.”
The rollout of the COVID-19 vaccine developed by Pfizer Inc. PFE and BioNTech SE BNTX continued, while other vaccine candidates were seen moving closer to approval.
“The recent strength we have seen in the energy sector definitely has a tail wind of the U.S. dollar being weak and still going lower,” Zahir said. On Wednesday, the ICE U.S. Dollar Index DXY, -0.18% was little changed as oil futures settled, but 0.6% lower on the week, providing support for dollar-denominated oil prices.
West Texas Intermediate crude for January delivery CL.1, +0.46% CLF21, +0.46% edged up by 20 cents, or 0.4%, to settle at $47.82 a barrel on the New York Mercantile Exchange. February Brent crude BRN00, -0.04% BRNG21, -0.04%, the global benchmark, added 32 cents, or 0.6%, at $51.08 a barrel on ICE Futures Europe.