Oil Prices Rise on US’ Falling Inventories, Stimulus Package

Oil prices rose on Tuesday morning following the advance of an improved US stimulus package through the House of Representatives on Monday and news that the country’s crude inventories fell for the third week straight.

WTI sat at US$47.96 per barrel at 12:34pm CST, an increase of 0.73 percent since the close of yesterdays’ trading, though earlier in the day it had risen to US$48.31 per barrel. Brent crude also saw gains of 0.53 percent by the same time, rising to US$51.14 per barrel after reaching US$51.60 earlier in the day. Prices for Mexico’s crude basket will not be available until the end of day’s trading.

Increases were caused by the confluence of yesterday’s vote passed by the House of Representatives for the US stimulus package to increase from US$600 for most Americans to US$2,000 and the decrease in domestic crude inventory capacities. Bloomberg reports that inventory levels fell by 2.6MMboe last week.

The US stimulus bill, which was haggled over for several months due to heavy criticism from US President Donald Trump, was condemned by the broader public as being completely insufficient to meet the needs of ordinary people. It is hoped that if the bill passes through the Senate, the additional financial assistance will activate the economy and generate increased growth.

Despite the rollout of vaccinations in various countries including Mexico, the threat of mobility restrictions being reinforced and consumption falling again remains a real concern for the oil and gas industry. The more contagious variant recently identified in the UK has now spread to most European countries and as far away as Japan, India and Australia.

Yesterday saw mixed news from Russia, as Deputy Prime Minister Alexander Novak said that though oil demand recovery would continue, it would grow only “5MMb/d to 6MMb/d next year”, Argus Media reports. Russia will meet with Mexico and OPEC+ members on Jan. 4 to discuss the next phase of production increases. Novak said that Russia would vote for an increase “if the situation is normal, stable”.

Mexico’s Energy Minister was the only female present earlier this month when OPEC+ clinched a deal to increase production output by 500Mb/d beginning in February as part of the historic 9.7MMb/d production cut agreed upon earlier this year.