Oil held gains after capping a fifth straight weekly advance on an OPEC+ production deal and hopes for another round of U.S. stimulus that could provide an immediate demand boost before vaccines are widely rolled out.
Futures in New York traded near $46 a barrel after rising 1.6% last week to close at a nine-month high on Friday. The Organization of Petroleum Exporting Countries and its allies came to a compromise agreement under which they will add 500,000 barrels a day of output from January and then hold monthly meetings to decide on subsequent moves.
U.S. House Speaker Nancy Pelosi said there’s momentum building toward a compromise fiscal stimulus plan, although Republicans complained about the scale of aid to states included in the bipartisan proposal that’s become the best chance yet for a deal.
Oil surged around 27% last month on optimism that energy demand wold recover quickly next year as Covid-19 vaccines are rolled out. The oil futures curve is signaling tighter supply as demand in Asia booms and the key North Sea market strengthens. The prompt timespread for Brent crude remained in backwardation even after OPEC’s compromise deal, a bullish signal that indicates the market doesn’t see a risk of a supply glut.
In another positive sign, Saudi Arabia raised oil pricing for customers in its main market of Asia. The increase, the biggest in five months, indicates the world’s largest oil exporter is confident global energy demand is strong enough to absorb the small boost in output from OPEC+ members next month.