Oil price gains continue on positive U.S. unemployment, ongoing stimulus talks

By Andres Guerra Luz on 10/22/2020

(Bloomberg) --Oil extended gains after House Speaker Nancy Pelosi said a stimulus deal is close to being reached in Washington.

Futures in New York rose as much as 2.2% on Thursday. Pelosi said the two sides are “just about there” and progress has been made all week in talks. Meanwhile, the number of Americans filing for unemployment benefits fell more than expected, pointing to a gradual recovery in the labor market.

The labor market data brings about the idea that “people are going back to work even with some renewed lockdowns,” said Michael Lynch, president of Strategic Energy & Economic Research. “People are coping more without shutting down businesses, which could mean more oil demand in the short-term.”

Any rally in oil prices still faces resistance from the threat of virus flareups worldwide. In a troubling sign for consumption, Neste Oyj Chief Executive Officer Peter Vanacker said that oil refiners need to cut more capacity, especially in Europe, as demand drops and capacity is added elsewhere. Meanwhile, toll road use in France posted the biggest year-over-year drop last week since July, according to data from Atlantia, which operates such roads.

Meanwhile, Pelosi and Treasury Secretary Steven Mnuchin will pick up discussions of a stimulus package again Thursday. Senate Republicans remain the ultimate roadblock to enacting a roughly $2 trillion deal being negotiated by Pelosi and Mnuchin.

Prices:

  • West Texas Intermediate for December delivery rose 85 cents to $40.88 a barrel as of 11:03 a.m. in New York
  • Brent for December settlement gained 91 cents to $42.64 a barrel

China is showing signs of strengthening fuel consumption. Traders are buying up cargoes and sending them toward Asia’s biggest economy, hoping to capitalize on an expected surge in demand at the end of the year. Russia’s ESPO crude, a grade often purchased by Chinese refiners, traded at a premium of $2.20 to Dated Brent, traders said.

Other oil-market news:

  • Exxon Mobil Corp. plans to lay off an unspecified number of employees as low oil prices force the company to delay major projects, Chief Executive Officer Darren Woods said in an email to staff.
  • The shipping sector is providing an outlet for surplus oil products such as diesel that have swelled due to a virus-driven demand hit, but questions about changing ship fuel quality are starting to raise concerns.
  • After years of setbacks and false starts, Libya is back in the oil game.
  • Trafigura Group bought a more than 3% stake in Saras SpA, sending the Italian refiner’s shares higher.

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