By Barani Krishnan
Investing.com - Crude oil futures hit four-month highs on Tuesday on bets that another upcoming U.S. coronavirus stimulus would help boost demand for energy, amid data showing an explosion in Covid-19 cases and doubts about U.S. fuel consumption since the peak 4th of July driving weekend.
The European Union separately agreed on a $750 billion stimulus package amid work on vaccine developments for the coronavirus.
Analysts’ forecasts that U.S. crude inventories fell again last week, extending the previous week’s draw, was another factor shoring up crude prices.
“We continue to be a rudderless oil market blowing in the wind and the wind just shifted north due to the macro,” Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina, said. “It’s hard to be short in such an environment.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up $1.15, or 2.8%, at $41.96 per barrel. It hit $42.51 at the session peak, its highest since March.
London-traded Brent, the global benchmark for oil, gained $1.08, or 2.5%, to trade at $44.36 by 2:45 PM ET (18:45 GMT), after a four-month high earlier at $44.88.
The number of people infected with the coronavirus in different parts of the United States was anywhere from two to 13 times higher than the reported rates for those regions, according to data released Tuesday by the Centers for Disease Control and Prevention.
House Speaker Nancy Pelosi said she hoped the Congressional Democrats she leads and President Donald Trump’s Republican side can “resolve our differences and have a bill by the end of next week” for the next U.S. fiscal response to the pandemic. A $600 per week federal unemployment benefit buoying millions of Americans expires at the end of July.
On the U.S. crude inventory front, analysts forecast a drop of 1.95 million barrels last week after the previous week’s draw of 7.5 million.
As for gasoline stockpiles, expectations were for a decline of 1.18 million barrels versus the previous drop of 3.15 million.
Distillates inventories likely slid by 550,000 barrels, widening the previous draw of 453,000.
Industry group American Petroleum Institute will issue its own snapshot later on Tuesday on these inventories, ahead of official data from the U.S. Energy (NASDAQ:USEG) Information Administration on Wednesday.
Reuters oil analyst John Kemp said last week that price premiums for gasoline and diesel over crude have been flat or falling for almost four weeks since June 23 amid anxiety about a resurgence in the coronavirus and producer group OPEC’s attempts to roll back on output cuts.
“OPEC+ is anxious to see higher crude prices as soon as possible but its ambition is likely to be thwarted in the short term by the renewed softness in fuel consumption,” Kemp said.