Oil prices touch 9-month high as US nears $900bn relief package

Oil prices rose and hit a nine-month high, with traders positive about progress towards a US fiscal stimulus deal and China and India’s record-breaking refining demand.

Last day, US lawmakers edged closer to agreement on a $900 billion spending package for virus relief. On 17 December, the US dollar set a two and a half year low against major competitors. Since crude is priced in greenbacks (dollars), this made oil cheaper for buyers holding other currencies.

At $51.50 a barrel, Brent crude futures settled up 42 cents and reached a session high of $51.90. US West Texas Intermediate (WTI) crude futures rose by 54 cents to $48.36 a barrel, with a session high of $48.59. Both benchmarks hit their highest since early March.

“Asia was ahead of the curve in recovery mode from the Coronavirus,” said Phil Flynn, a senior analyst in the sector. “Looking at what we’re seeing in Asia is raising expectations that in the New Year we will see a rapid increase in crude oil demand, as the vaccine rolls out in the US,” he said.

Recently, the United States expanded its campaign to deliver COVID-19 vaccine shots. US crude inventories fell by 3.1 million barrels in the week to December 11, the Energy Information Administration said, far more than analysts’ expectations of a 1.9-million-barrel drop.

“It seems to be a much better festive season (Christmas and New Year) than most bullish traders could expect for. But whether oil prices can remain as high and keep these gains is still questionable amid the demand destruction lockdowns are causing,” said analysts.

COVID-19 and subsequent travel restrictions had a massive impact on the oil industry. Earlier this month OPEC+ (Organization of the Petroleum Exporting Countries) had decided to ease oil-output cuts next year signaling signs of recovery. In January, the group will introduce to the market 500,000 barrels per day of production, and ministers will then conduct monthly meetings to decide on the next steps