Crude oil futures surged during the mid-morning trade in Asia March 1, with the oil market reversing the previous session’s losses as risk-on sentiment gripped the markets following the US House of Representatives’approval of further US fiscal relief, even as traders continued to eye the upcoming OPEC+ meeting.
At 10:44 am Singapore time (0244 GMT), the ICE Brent May contract was up by $1.14/b (1.77%) from the Feb. 26 settle to $65.56/b, while the April NYMEX light sweet crude contract was up by $1.07/b (1.74%) to $62.57/b.
The rise in oil prices this morning marks a recovery from the slide in prices seen on Feb. 26, when the Brent marker and NYMEX light sweet crude marker fell 2.56% and 3.19% respectively due to the rising US Treasury yields rapidly pushing up the dollar.
Oil prices however, reversed their losses this morning, with the recovery galvanized by the US House’s approval of an expansive $1.9 trillion COVID-19 stimulus package, which includes direct payments, unemployment benefits and funds for COVID-19 vaccination programmes. The package is now pending approval from US Senate.
Fiscal relief in the US is widely expected to energize the US economic recovery, improving demand for oil and energy.
“Oil prices are recovering this morning in line with most risk assets on the back of the US stimulus bill passing the House, and as central banks continue to sabre rattle to ward off market-implied financial tightening,”Stephen Innes, chief global market strategist at AXI, said in a March 1 note.
The stimulus package notwithstanding, the market was already celebrating an improved demand outlook for oil, caused by a rapid roll-out of vaccines, and the abatement of the coronavirus cases in major economies around the world.
The market is now looking intently towards the March 4 OPEC+ meeting, which is expected to offer guidance into the coalition’s production plan going forward.
Market analysts generally expect the coalition to announce an increase in production from March levels but have cautioned that a large increase in supply could spook the markets, leading to a downward price correction.
Regardless, market analysts believe that the expected uptick in demand should be able to accommodate a moderate increase in OPEC+ supply.
“OPEC+ meeting on March 4 is an increasingly essential ingredient, and producers face the tricky task of sorting through the various moving parts to form a strategy that makes everyone happy. But let’s not beat around the bush; more supply needs to come onto the market to ensure OPEC+ meets incremental demand and keeps internal discipline ducks in a row,”said Innes.
