Oil was up on Friday morning in Asia despite conflicting U.S. stimulus reports, an apparent schism in OPEC, and the ever-rising COVID-19 numbers. B
Oil was up on Friday morning in Asia despite conflicting U.S. stimulus reports, an apparent schism in OPEC, and the ever-rising COVID-19 numbers.
Brent oil futures was up 0.23% to $44.30 by 11:26 PM ET (3:26 AM GMT) and WTI futures inched up 0.10% to $41.94. Both Brent and WTI futures stayed above the $40 mark.
The continuing rampage of COVID-19 across the globe continues to form the main driver of oil prices, as the coronavirus pandemic escalates, with Western economies particularly hard hit. There are over 56 million global cases and 1.36 million deaths, as of Nov. 20, with a fifth of both totals are from the U.S. alone, according to data from Johns Hopkins University. The fears over lack of demand will be keeping a firm lid on prices for some time come.
Other factors influencing oil’s current uncertain behavior stem from contradictory U.S. signals over a COVID-19 stimulus package and the Organization of Oil Exporting Countries (OPEC) appearing to conflict with each other over a way forward.
In the U.S., Treasury Secretary Steven Mnuchin has asked for $455 billion of the current U.S. stimulus package to be returned to the U.S. Treasury, the funds were meant for general lending to local government, business, and non-profits. The lending program has been credited with playing a vital role in shielding the country from being far worse hit by the COVID-19-caused economic recession. The potential loss of the program is causing fears of an even greater slump in demand than previously factored in.
The U.S. Federal Reserve, which is responsible for overseeing the loan program responded that it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
At the same time, U.S. Senate Republican Majority Leader Mitch McConnell has agreed to return to the table with the Democrats to try and hammer out a new COVID-19 relief package, which gives rise to hopes of a sustaining demand, rather than a fall. Consequently, markets were uncertain of quite which way to turn.
“Any stimulus deal done before the holidays will help keep crude prices stay near the upper boundaries of its recent trading range,” Edward Moya, senior market analyst at OANDA told Reuters.
Adding to market caution are suggestions of split within OPEC, the United Arab Emirates (UAE) are taking stance unusually at odds to that of Saudi Arabia. The UAE is suggesting that continuing the current supply cuts may not be the way forward, whereas Saudi Arabia has been strongly advocating the reverse. There have been strong, but unverified, reports that the UAE may even be considering quitting its membership of OPEC, should this be the case, it would be one of the largest crises in the oil cartel’s history. Investors now look to OPEC+’s full ministerial meeting, to be held on Nov. 30 and Dec. 1, for further guidance.