Oil jumps with U.S. stimulus optimism lifting markets

(Bloomberg) — Oil jumped the most since May in New York, rallying in tandem with equity markets on optimism over the potential for more U.S. fiscal relief.

U.S. benchmark crude futures advanced as much as 7.2% on Monday. House Speaker Nancy Pelosi said Friday that President Donald Trump’s Covid-19 diagnosis might change the tenor of the talks on new stimulus and Trump tweeted from the hospital that a deal needs to get done. Meanwhile, a decision on Trump’s release is unlikely to occur before Tuesday, according to people familiar with the matter.

There are still hopes for a new stimulus package in the U.S., said John Kilduff, a partner at Again Capital LLC. “We need the economy to get boosted, and for that to translate to improved demand for refined fuels.”

Prices are still recovering from a selloff in recent weeks amid worries that a resurgence of the pandemic in major economies may derail the fragile recovery in oil demand. Reopening plans across the world are being thrown into question, with New York City planning to close schools and non-essential businesses in nine hotspots and Ireland debating a return to full lockdown. All the while, Libyan output rose to about 300,000 barrels a day as a fledgling recovery progresses, putting further pressure on the world’s oil markets.

With prices heading lower for the year, U.S. output is expected to remain muted as the industry struggles with layoffs and bankruptcies. Almost three-quarters of the pandemic-driven jobs losses in the U.S. petroleum and chemical sectors may not come back before the end of next year, according to Deloitte LLP.

“The U.S. is not going to cap a rally in crude,” said Peter McNally, global head for industrials, materials and energy at Third Bridge. “It’s not like any company is sitting there with a war chest full of capital, able to opportunistically invest in North America and increase drilling activity at low rates.”

Elsewhere, a strike in Norway will cut about 330,000 barrels a day of oil and gas production, about a third of which is oil, lending some immediate support to oil markets. Meanwhile, Total SE Chief Executive Officer Patrick Pouyanne said fuel consumption in Europe is almost back at last year’s level. In the U.S., gasoline demand rose 3.2% in the seven days ending Saturday from a week earlier, reversing three consecutive weeks of declines, according to GasBuddy.

Focus is also once again shifting to storms in the U.S. Tropical Storm Delta is forecast to become a hurricane in the Gulf of Mexico later this week. Its winds could reach 105 miles (169 kilometers) per hour as it crosses the Gulf, making it a Category 2 storm on the five-step Saffir-Simpson scale, the U.S. National Hurricane Center said Monday

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