Oil Rises On Stimulus Hopes, But Gains Capped By Covid

Meanwhile, more acquisitions and less streaming are the latest signs of economic recovery: File Image/PixaBay

Oil prices edged up on Tuesday due primarily to the U.S. reportedly nearing agreement on a second stimulus package - but the gains were capped by the rebound in infection rates in Europe.

Following House of Representatives speaker Nancy Pelosi stating that she was optimistic about reaching a stimulus deal with the White House and aid going to impacted business sectors as early as next month, Brent gained 20 cents to $42.82 per barrel; West Texas Intermediate settled 63 cents higher at $41.46 per barrel.

John Kilduff, founding partner at Again Capital, remarked, “If we get a deal, I think that would be supportive, and if we don’t get a deal, I think that’s going to be somewhat punishing for prices.”

Also capping gains was Libya, whose output from its biggest oilfield resumed on October 11 and is now at about 150,000 barrels per day (bpd); another 70,000 bpd oilfield is expected to restart on October 24.

Meanwhile, Ihsan Abdul Jabbar, oil minister for Iraq, told media on Tuesday that projects in his country are being delayed because of the production cuts enacted by the Organization of the Petroleum Exporting Countries (OPEC); however, he added that “I think quarter two, 2021 will be more attractive to every aspect of our business.”

He expects Iraq will raise its production capacity to 7 million bpd in the next five to six years, from around 5 million bpd now.

Jabbar's optimism over oil's future flies in the face of analytical worries over rising infection rates but is in keeping with some other industry developments, to wit: ConocoPhillips' announcement Monday that it would buy Concho Resources Inc. for about $9.7 billion in stock suggests that rumours about shale's death were greatly exaggerated, according to David Fickling, a commodities columnist for Bloomberg.

In noting other recent acquisitions such as Devon Energy Corp. buying WPX Energy for $2.56 billion in shares, Fickling wrote, "Life is much more manageable in the range of $40 a barrel than many would have expected a few months ago.

"Thanks to the slump in interest rates this year, investment-grade energy companies can borrow as cheaply as at any point since before the last oil price crash in 2015."

He concluded, "This year’s glimpse into the abyss of an oil glut didn’t kill the shale industry; instead, it may have only made it stronger."