Oil Rebounds On Hope Of Stimulus Package

The bank also sees a significant resurgence next year of jet fuel demand: File Image/PixaBay

The increasing likelihood of a second fiscal stimulus to support a U.S. economy damaged by government lockdowns kept Covid fears somewhat at bay on Thursday and boosted oil prices, but not enough to overcome the previous session's loss of up to 4 percent.

U.S. House speaker Nancy Pelosi's comment early Thursday that Democrats and Republicans were nearing an agreement on the stimulus package resulted in Brent rising 70 cents to $42.42 per barrel  and West Texas Intermediate gaining 59 cents to $40.62.

Of the package, Gary Cunningham, director of account management and research at Tradition Energy, remarked, "It sends a positive sign that the U.S. economy will continue to recover and U.S. domestic consumption of petroleum products will continue."

But capping gains was the persistent fear that government lockdowns in Europe due to rising virus infection rates would negatively impact demand. Of particular concern Thursday were developments in France where ta record 41,622 new cases led to Prime Minister Jean Castex declaring that "the second wave is now under way."

Still, Goldman Sachs believes prices will still rise in the longer term and expects average Brent prices rising to $59.40 next year from $43.90 this year, and WTI increasing to $55.90 from $40.10.

In fact, Goldman forecasts a bull market for commodities in 2021, due to markets becoming worried about inflation as a result of historic fiscal spending and low interest rates - which the bank says will likely drive more commodity investment.

Thursday also saw potential good news regarding Canada's embattled oil sands: BMO Capital Markets said the value of Canadian oil would increase next year thanks to less output of competing crude from Latin America.

Meanwhile, Russian president Vladimir Putin on Thursday helped assuage worries that the Organization of the Petroleum Exporting Countries (OPEC) and its partners would not respond to market needs and follow through with plans to relax their output cuts: he said although there is no need for global oil producers to alter course because demand is on the rise, he wouldn't rule out extending deep oil cuts for longer if market conditions warranted.