NEW YORK: Oil rose on Wednesday on expectations that US President Joe Biden’s administration will deliver massive stimulus spending that will lift fuel demand and enact policies that will tighten crude supply.
Brent crude was up 40 cents at $56.30 a barrel at 12:23 p.m. (1722 EST) US West Texas Intermediate (WTI) crude climbed 37 cents, or 0.7%, to $53.35.
US President Joe Biden, who was inaugurated on Wednesday, is expected to take measures to curb the US oil industry, including re-entering the Paris climate accord, cancelling a permit for the Keystone XL crude oil pipeline and pausing arctic drilling.
“I think the Biden administration on day one is making it clear that there’s a new sheriff in town and we’re going to go back to policies that are pro-green energy and anti-fossil fuels,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “It’s going to mean higher prices and the market is starting to price in that reality.”
US Treasury Secretary nominee Janet Yellen on Tuesday urged lawmakers to “act big” on pandemic relief spending, which boosted oil prices. A fall in the dollar after the comments helped oil to rally, analysts said.
“Increased fiscal support means more growth and higher US oil demand,” said Eugen Weinberg of Commerzbank. “What is more, the oil market is likely to remain in supply deficit both in the first quarter and in the year as a whole.”
A record output cut by OPEC and its allies, a group known as OPEC+, last year helped lift prices from historic lows.
This month Brent hit an 11-month high of $57.42, helped by Saudi Arabia pledging to make additional, voluntarily cuts and most OPEC+ members agreeing to keep output steady in February.
Oil drew more support from expectations of lower US crude inventories. Analysts estimate crude stocks fell by 300,000 barrels in the week to Jan. 15. The first of the week’s two supply reports is due on Wednesday from the American Petroleum Institute.