More Oil Gains as Positive Effect of Hurricane Delta Mitigates Stimulus Postponement

The strong gains caused by U.S. president Donald Trump's quick recovery from Covid were pared somewhat on Tuesday when Trump announced that he's postponing the long-awaited Covid stimulus package talks until after the November election - which investors regarded as yet another threat to demand recovery.

Still, energy companies shutting offshore oil platforms in anticipation of Hurricane Delta was enough to provoke another session of price gains: Brent climbed $1.40 to $42.69 per barrel, while West Texas Intermediate rose $1.45 to $40.67.

John Kilduff, founding partner at Again Capital, said, "The petroleum complex desperately needed that stimulus to come through so that the economy could perk back up and refined-product demand could hopefully rebound."

But if nothing else, overall sentiment was surprisingly upbeat on Tuesday, partly due to the fact that although the American Petroleum Institute reported an increase in U.S. crude supplies for last week, it also showed gasoline stockpiles falling 867,000 barrels in the same time period while distillate supplies fell more than 1 million barrels - another sign that demand continues to recover, despite analytical skepticism.

Ryan Fitzmaurice, commodities strategist at Rabobank, pointed out that improving crack spreads for refined products "could work to support the oil rally, given refiners will likely increase their appetite for crude oil on the prospects of better margins ahead."

More good news on Tuesday was delivered by energy consultancy Enverus, which reported that although only 28 merger and acquisition oil deals with a disclosed value were signed during July-September, the $21 billion total value of these deals was 19.4 percent higher than a year earlier.

Looking at the longer term outlook on Tuesday was Chad Morganlander, portfolio manager at Washington Crossing Advisors, who remarked, "We believe that as you start to move towards 2021 and economic activity starts to pick up, due in part because perhaps we get a Covid vaccine, then you'll start to see oil prices move in a commensurate fashion into 2022 where you can get oil at $60 a barrel."