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Oil prices jump 1%, Biden's policy supports oil prices
Oil prices rose approximately on Monday, and the two major crude oil futures both increased. US WTI crude oil March futures closed up 50 cents, or 0.95%, to US$52.77 per barrel; Brent crude oil March futures closed up 47 cents, or 0.85%, to US$55.88 per barrel. Last week, U.S. oil closed down nearly 0.30%, and Bursa oil closed up more than 0.50%.
Optimism surrounding the US economic stimulus plan and some supply concerns pushed up futures prices, but demand concerns caused by the coronavirus lockdown limited the gains.
US President Biden’s early measures may support the oil market this year and next. "The new President Biden seems to be pushing for the rapid approval of his $1.9 trillion pandemic rescue plan. The market interpretation is that this clearly shows that the new US government aims to stimulate economic recovery, which will naturally benefit fuel consumption", Rystad Oil Said Bjornar Tonhaugen, head of marketing.
In addition, analysts Damien Courvalin and Jeff Currie and others stated in a January 21 report that the Biden administration may focus on fiscal expenditures, lack of urgency to lift sanctions on Iran, and restrictions on the North American energy industry, which may have supported oil prices.
Iraq’s national oil marketing organization SOMO revealed that Iraq will cut its oil production to 3.6 million barrels per day in January and February to compensate for OPEC+’s quota gap. This time, Iraq is following in Saudi Arabia's footsteps to reduce production. Saudi Arabia previously decided to reduce production by 1 million barrels per day in February and March, which once successfully boosted oil prices.
President Biden announced the new crown pneumonia relief plan, prompting Goldman Sachs economists to increase the estimated value of additional fiscal measures from 750 billion US dollars to 1.1 trillion US dollars. According to Goldman Sachs, a larger boost to disposable income and government spending will limit this round of recovery to promote oil demand recovery before it hurts oil demand.
Tanker tracking company Petroleum-logistics said Monday that the Organization of Petroleum Exporting Countries (OPEC) and its allies have implemented an average production reduction agreement of 85% so far in January. The data shows that the alliance's enforcement of promised supply restrictions has increased.
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