Oil rose more than 2% on Friday in hopes that the US subsidy would boost the economy and fuel demand. Supply has narrowed due to production cuts in the major producing countries.
Brent crude settled up $1.29, or 2.1%, at $62.43 a barrel by 1:32 p.m. ET (1832 GMT) after rising to a session high of $62.83, the highest since Jan. 22, 2020. WTI oil ended the session up $1.23, or 2.1%, at $59.47 after rising to a session high of $59.82, the highest since Jan. 9, 2020.
WTI crude notched a weekly gain of about 4.7% while Brent rose 5.3% on the week.
US President Joe Biden continues to insist on the approval of the $ 1.9 trillion coronavirus aid plan to support economic growth and help millions of unemployed people. The anticipated US incentives and ongoing vaccinations are providing support to the oil market and maintaining the appetite for risky assets.
Three major US stock indices continued their two-week rise. The decline in new cases of COVID-19 and hospitalizations raises hopes for a return to normal. While COVID-19 vaccines are expected to support demand recovery, oil demand is still lagging global supply.
Oil prices have soared in recent weeks due to output cuts from OPEC + and the allied producer group.
Oil prices have maintained their recent gains this week, especially with signs that crude oil stocks in the US are falling.
Inventories are likely to drop further this year, as the demand for fuel in transport is booming as the virus-related restrictions on travel are eased.
Still, OPEC cut its forecast for global oil demand by 110,000 barrels per day this week to 5.79 million barrels for 2021.
The IEA report paints a more pessimistic picture than market participants predicted given the current high prices. Demand data from the world’s major oil importers also paint a bleak picture.
According to official data, the number of travelers to China before the Lunar New Year holidays dropped 70% from two years ago, as coronavirus restrictions prevent the world’s largest annual internal migration.
US drillers increased the number of oil and gas rigs for the 12th week in a row this week. However, with increased US production, the rebalancing in the market will be exposed to an adverse wind.