By Adedapo Adesanya
Oil prices were able to hold a bullish position on Tuesday as investors banked on hopes that Congress would approve the $2,000 stimulus checks in the United States.
The bill to increase stimulus checks from $600 to $2,000 could be scheduled for another vote in the Senate at a later date this week. The US House on Monday passed the bill that would increase covid stimulus payments from $600 to $2,000 by 275-134 vote, needing a two-thirds majority to pass the bill now heads to the US Senate.
President Trump has now signed the $2.3 trillion coronavirus relief and federal funding bill passed by Congress a week ago which includes a $900 billion COVID-19 aid.
This action supported the oil market yesterday, raising the price of the Brent crude higher by 19 cents or 0.37 per cent to $51.05 per barrel and lifted the West Texas Intermediate (WTI) by 37 cents or 0.78 per cent to $47.99 per barrel.
But it is important to note that while the approval raised hopes for stronger oil consumption in 2021, the rising worldwide coronavirus infections and related travel curbs are weighing on the short-term outlook.
There’s also a risk that the recent price rally might lead to production coming back from producers that are not part of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreement, which sees them reduce outputs.
OPEC+ is set to meet on January 4 to determine production levels for the following month just as the market intends to increase production targets in the new year.
The group plans to return 500,000 barrels a day of output to the market from January but plans to hike production in 2021 continue to weigh on the market and threaten to undermine its efforts to ramp up output while avoiding flooding the market.
Oil has recovered from historic lows hit this year as the pandemic hammered demand. Brent reached $52.48 on December 18, its highest since March.
There are also concerns over more travel restrictions as the new mutation in the coronavirus spreads globally. However, the UK is poised to approve the COVID-19 vaccine produced by AstraZeneca Plc and the University of Oxford.
