Oil Up Following Biden’s InaugurationBy MBN Staff | Wed, 01/20/2021 - 18:33
The inauguration of Joe Biden as the 46th President of the US pushed oil prices higher on Wednesday, as markets reacted to the arrival of a president that vowed to tackle the US spiraling COVID-19 death toll and the incoming economic aid package.
WTI crude rose by 0.57 percent to US$53.24 per barrel from US$52.98 against Monday’s close, while Brent went from US$55.9 per barrel to US$56.08. The Mexican crude basket’s Monday price jumped 1.21 percent to US$51.57 per barrel. Its Tuesday performance will be posted tomorrow.
Markets were optimistic despite the move by the International Energy Agency on Monday to cut its oil demand outlook for 2021 by 300Mb/d against its December estimate of 99.6Mb/d due to crippling effects of the still rampant virus.
Biden has promised a US$1.9 trillion aid package aimed at kickstarting a struggling American economy and delivering more direct aid to individuals following the US$900 billion package agreed in December. According to CNN, Biden’s package will include an additional US$1,400 sent directly to individuals, more unemployment aid for the millions who have lost their jobs, and an extension of the federal eviction moratorium, among others.
Eugen Weinberg, Commodity Analyst at Commerzbank, told MarketWatch that the extra aid would drive a recovery and thus push prices higher. “The calculation is simple: increased fiscal support means more growth and higher US oil demand,” he said.
Aside from political change in the US, markets were also elevated by news that China’s refinery output had risen 3 percent and hit a record high in 2020, reported Reuters.
WTI has been above the US$50 per barrel mark for more than two weeks after vaccination campaigns began. Yet, the threat of the virus remains, with Mexico, alongside most European nations, experiencing a sharp jump in positive cases following the Christmas period. Mexico now has 143,000 deaths directly related to the virus, while yesterday, the US surpassed 400,000 COVID-19 deaths.
Part of the continuity of oil prices is due to Saudi Arabia’s decision to cut its output by 1MMb/d in February and March, taken at the OPEC+ meeting at the start of January. The unexpected news, announced on the day that OPEC+ agreed to sustain its decision to introduce 500Mb/d of production back into the market, signaled the deep concern from that country, one of the world’s major producers, about the persistent COVID-19 threat.