Oil up 1% on stimulus hopes, market tightening ahead of Biden inauguration

NEW YORK (Reuters) – Oil rose 1% on Wednesday, buoyed by expectations that the new US administration will provide massive spending stimulus that will increase fuel demand and trigger policies that will restrict crude oil supply.

Brent crude oil was up 53 cents, or 1%, to $ 56.43 a barrel at 11:24 am EST (1624 GMT). US West Texas Intermediate (WTI) crude rose 44 cents, or 0.8%, to $ 53.06.

Joe Biden’s grand opening is Wednesday, and the president-elect is expected to take steps to curb the U.S. oil industry, including re-entering the Paris climate deal, canceling a permit for the Keystone XL pipeline, and the suspension of arctic drilling [nL1N2JV1AS] [nL1N2JV19J]

“I think the Biden administration on day one is making it clear that there is a new sheriff in town and we will go back to policies that are pro-green energy and anti-fossil fuels,” Phil Flynn, senior analyst at Price Futures Group told Chicago. “It will mean higher prices and the market is starting to price in that reality.”

US Treasury Secretary Janet Yellen urged lawmakers to “act big” on pandemic relief spending on Tuesday, which has raised oil prices. A drop in the dollar after comments helped oil rise, analysts said.

“More fiscal support means more growth and greater demand for oil in the United States,” said Commerzbank’s Eugen Weinberg. “Furthermore, the oil market is likely to remain in supply shortfalls in both the first quarter and the year.”

A record cut in production by OPEC and its allies, a group known as OPEC +, last year helped raise prices from historical lows.

Brent reached an 11-month high of $ 57.42 this month, aided by Saudi Arabia which pledged to make further voluntary cuts and most OPEC + members agreed to keep production stable in February. .

Oil got more support from lower US crude oil inventories expectations. Analysts estimate that crude oil inventories fell by 300,000 barrels in the week through January 15. The first of two reports on the offer of the week is expected on Wednesday. from the American Petroleum Institute. [EIA/S]

Earnings have been limited by concerns about short-term demand as COVID-19 infections rise.

China’s capital Beijing on Wednesday announced tougher control measures for COVID-19. Germany on Tuesday extended the lockdown for most shops and schools.

Additional reporting by Alex Lawler in London, Sonali Paul in Melbourne and Shu Zhang in Singapore; Editing by Jason Neely and David Goodman