Brent near one-year high

Oil was up Wednesday morning after expectations that global oil stocks will stabilize and progress in the US towards passing US. President Joe Biden’s $1.9 trillion stimulus package fueled earlier gains.

Brent oil futures were up 0.31% to $58.01 by 8:30 PM GMT, at an almost one year high,  while WTI futures were up 0.69% to $55.14. Both Brent and WTI futures remained above the $50 mark.

In the first step towards passing the package, the Senate voted to open debate on a fiscal 2021 budget resolution with coronavirus aid spending instructions. With the vote split 50 to 49 along party lines, it is also an indication that the Democrat-majority chamber will advance the bill without Republican support.

Also buoying sentiment was the Organization of the Petroleum Exporting Countries and allies, or OPEC+, saying that oil stockpiles will decline to below a five-year average by June in its latest assessment, indicating that production cuts are bringing the market back into balance.

“The strategy was very clear. OPEC and allies set out to cut a deal that would normalize global excess inventory through 2021, well, they’re on track,” National Australia Bank (OTC:NABZY) head of commodity research Lachlan Shaw told Reuters.

A document reportedly said that OPEC+ expects output cuts will keep the market in deficit throughout 2021, peaking at 2 million barrels per day in May, despite revising its outlook for demand growth downwards.

Meanwhile, the cartel’s Joint Technical Committee will present the assessment to the Joint Ministerial Monitoring Committee (JMMC) that meets later in the day.

An unexpected fall in US crude oil supply also supported prices.

Crude oil supply data from the American Petroleum Institute showed a draw of 4.261 million barrels for the week ending Jan. 29. Forecasts prepared by Investing.com had predicted a 367,000-barrel build, and a 5.272-million-barrel draw was recorded during the previous week.

Data from the US Energy Information Administration is due later in the day.

Although the continual spread of Covid-19 globally continues to pose short-term risks to fuel demand, investors hope that the rollout of Covid-19 vaccines will gradually lead to restrictive measures being lifted and increased demand.

“So I think that’s certainly buttressing demand hopes, together with impacts from stimulus,” said NAB’s Shaw.

First published on Investing.com