Oil was little changed with the market weighing near-term demand risks from rising virus cases against hopes for more stimulus and a vaccine rollout.
Futures in New York fell slightly after choppy trading during much of the session. U.S. equities climbed toward a record amid news Republican congressional leaders plan to talk with the White House about Covid-19 relief. Meanwhile, further progress on a vaccine rollout that is seen as crucial to jumpstarting a rebound in oil demand provided additional support.
“The key for oil demand is to get the pandemic under control by the summer travel season,” said Jay Hatfield, CEO at InfraCap in New York. “You’re going to have some bad Covid headlines, but every bad Covid headline seems to be paired with a good vaccine headline.”
Further gains in oil prices will largely be dependent on how quickly vaccines can be made widely available to the public. The U.K. became the first western nation to start Covid vaccinations across the country, while a peer-reviewed study on a vaccine developed by the University of Oxford and AstraZeneca Plc showed it was effective. Ahead of a widespread vaccine rollout, the standout demand recovery in Asia has provided a bright spot for the otherwise depressed near-term consumption outlook.
“For demand to continue to pick up, a big part of that is going to be travel and an open economy,” said Peter McNally, global head for industrials, materials and energy at Third Bridge. “That goes back to vaccines.”
A U.S. stimulus package could aid a rebound in oil demand, but time is running short on passing a bill before Congress’ year-end break. Senate Majority Leader Mitch McConnell said he’s willing to set aside some of the sticking points that have impeded talks, telling reporters that Congress can’t leave for the year without passing relief.
Meanwhile, supply-side uncertainties remain on the horizon, with Iran preparing to raise oil output as a Joe Biden presidency nears. At the same time, the United Arab Emirates will provide Asian buyers with a little more crude next month after OPEC+ reached a compromise deal on cuts.
In the U.S., expectations are for a decline in domestic crude stockpiles, according to a Bloomberg survey. If confirmed by the U.S. Energy Information Administration, that would be the third consecutive draw. The industry-funded American Petroleum Institute will release its tally later on Tuesday.
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