Oil Pushes up on Expectations of U.S. Stimulus
By Barani Krishnan
Investing.com - Oil prices rose Monday on hopes that Republicans aligned with Donald Trump will come out and do a proper coronavirus relief deal with their Democrat rivals in Congress, despite the president going it alone with his string of executive orders.
“The oil complex is heavily reliant on that aid,” John Kilduff, founding partner at the New York hedge fund Again Capital, said, referring to the new Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up 72 cents, or 1.7%, at $41.94 per barrel.
London-traded Brent, the bellwether for global crude prices, closed the New York session up 59 cents, or 1.3%, at $44.94.
Three versions of stimulus disbursing aid of more than $3 trillion to U.S. businesses and individuals have been passed by Congress thus far since the Covid-19 pandemic brought the U.S. economy down in March, triggering a 5% GDP decline in the first quarter and a near 33% slump in the second.
A mulled fourth version of stimulus will likely add another $2 trillion to U.S. spending, weighing further on a battered dollar which should be supportive to commodities.
Republican lawmakers aligned to Trump could agree to a new coronavirus relief bill this week with their Democrat rivals in Congress if a “fair deal” could be reached, Treasury Secretary Steven Mnuchin said on Monday.
Trump, who stands for reelection in November, needs as many Americans working as possible if he wishes to nurse the U.S. economy back to health.
Jobless Americans previously got $600 a week in extra aid but that benefit expired during the week ended July 31. Trump had initially wanted that benefit cut to $200, saying the earlier payout was so “generous” that it discouraged many from returning to work, even with businesses having reopened from lockdowns forced by the pandemic.
But in the executive order he signed on Saturday, Trump set the weekly benefit at a self-determined $400, saying it is something that should be borne partly by the individual states with people filing for jobless claims. The Democrats want the original $600 payout to be restored instead. House Speaker Nancy Pelosi called Trump’s plan “unconstitutional”.
Oil prices were also supported Monday by data showing China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed toward pre-pandemic levels.
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