Oil resumes rally ahead of OPEC+ meeting as US passes stimulus package

LaToya Harding
·Business Reporter, Yahoo Finance UK
·2 min read
CROMARTY, SCOTLAND - SEPTEMBER 09: Oil rigs and drilling platforms are seen at sunrise on September 9, 2020 in Cromarty, Scotland. Complaints from locals have spiked over the past few months as the downturn in oil forced a significant increase in unused rigs being stored in the Cromarty Firth. Between May 19 and July 01 19 formal complaints were made, compared to five in the 10 months prior. Complaints relate to light and vibrations from the platforms with residents also complaining of hearing the tannoy systems used on the rigs. (Photo by Peter Summers/Getty Images)
Oil prices are now up by more than 25% year to date. Photo: Peter Summers/Getty Images

Oil prices rebounded on Monday, before retreating slightly, after the US House of Representatives passed a $1.9trn (£1.36trn) stimulus package over the weekend.

Brent crude (BZ=F) is currently flat, down 0.08% after a slowdown in China’s factory activity growth last month capped gains.

However, futures for May rose to $65.66 per barrel, while US West Texas Intermediate (WTI) crude futures jumped to $62.68 a barrel. Oil prices are now up by more than 25% year to date.

“Oil prices are recovering this morning in line with most risk assets on the back of the US stimulus bill passing the House,” Stephen Innes, chief global markets strategist at Axi, wrote in a note.

China, the world’s second-largest oil user, revealed that its official manufacturing PMI missed forecasts, expanding in February at a slower pace than a month earlier and hitting the lowest level since last May.

The official manufacturing Purchasing Manager’s Index (PMI) fell to 50.6 from 51.3 in January, data from the National Bureau of Statistics (NBS) showed on Sunday, remaining above the 50-point mark that separates growth from contraction.

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The approval of Johnson & Johnson’s (JNJ) COVID-19 vaccine also buoyed oil prices over the weekend, after a US Centres for Disease Control and Prevention advisory panel voted unanimously to recommend the jab for widespread use.

J&J expects to ship more than 20 million doses by the end of March and 100 million by midyear, enough to vaccinate nearly a third of Americans.

It comes ahead of a meeting later this week, in which The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) are thought to be discussing allowing as much as 1.5 million barrels per day of crude back in the market.

ING analysts said OPEC+ will need to be careful to avoid surprising traders by releasing too much of supplies back into the markets.

"More supply needs to come onto the market to ensure OPEC+ meets incremental demand and keeps internal discipline ducks in a row," Innes added.

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