Crude Rose over 1% on Tuesday on hopes that the the United States was getting close to sealing a deal on coronavirus relief, but the continued threat to demand from rising COVID-19 cases worldwide and a sustained increase in Libyan output brought a halt to prices from moving any higher.
November U.S. West Texas Intermediate crude futures finished up at $41.46 a barrel, up 63 cents, or 1.54%. The seemingly more active December contract settled up at $41.70, gaining 64 cents.
Brent crude futures for December delivery finished at $43.16 a barrel, rising 54 cents, or 1.27%.
Many investors it seems are following negotiations between the U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over another U.S. coronavirus aid package,
If a deal is struck It would certainly add great support, but if we don’t get a deal, It only looks like it’s going to be somewhat punishing for prices,
Prices picked up after Pelosi said she was optimistic Democrats could reach an agreement with the White House that could get aid out by early next month. She added there should be an indication of a possible agreement later on Tuesday.
Still, skepticism over the impact of a deal on oil markets lingered.
“Even allowing for a fresh stimulus package, risk appetite could take a hit from an unfolding of the ‘buy the rumor/sell the news’ phenomena,’” said Jim Ritterbusch of Ritterbusch and Associates. “With this possibility in mind, we will be looking to short December crude at or above the $42 mark for a trading turn to the downside.”
The return of COVID-19 cases across Europe and North America has sparked renewed lockdown measures coupled with a severe lack of demand has kept prices from moving higher, although OPEC+ came out monday pledging their full support to the industry in the face of demand issues.
However, those OPEC countries plan on scaling back the size of its production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd in January.
OPEC member Libya, which is surprisingly exempt from the cuts, is also continuing to ramp up production after armed conflict shut almost all of the country’s output in January, pumping more unwanted oil into an already oversupplied market.
Adding more fuel to the fire, crude inventories shot up by 584,000 barrels in the week to Oct. 16 to about 490.6 million barrels, data from industry group the American Petroleum Institute showed.
Expect to see Crude prices ranging around the $40 mark for the foreseeable future!
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