Oil posts weekly gain as hopes on stimulus aiding vaccine rally

Bloomberg

Oil rose for a seventh straight week as efforts to pass another US virus relief package added to optimism that the vaccine’s rollout will provide a long-awaited boost to demand.
Futures rose 1.5% in New York, extending this week’s rally to over 5%. Talks on a relief package have made some headway, with Senate Majority Leader Mitch McConnell saying he’s “even more optimistic now” that an agreement is near. Recent progress in rolling out a Covid-19 vaccine has also buoyed the outlook for consumption.
“It’s all about the return to pre-pandemic life, and we’re getting there,” said Edward Moya, senior market analyst at Oanda Corp.
The Bloomberg Dollar Spot Index is set for a weekly decline and has been trading near its lowest since 2018. A weaker dollar raises the appeal for commodities priced in the currency.
Underlying the climb in headline crude prices, premiums on nearer-dated contracts relative to later ones are indicating improving demand. The bullish pattern known as backwardation has strengthened at the back end of oil’s forward curve.
West Texas Intermediate’s nearest December contract trades more than a $1 a barrel higher than that for December 2022, compared to trading at a discount less than a month before. Yet, there are signs the market’s rally is due for a pause.
The spreading virus and lockdowns are weighing on demand, but the hit is much smaller than earlier in the year and is likely only a speed bump to rebalancing the market, according to a Goldman Sachs note. This will leave the oil market range-bound and choppy in coming weeks as vaccine enthusiasm is followed by headlines on tighten pandemic restrictions, the bank said.
Drilling rigs targeting crude oil in the US rose for the fourth straight week and to the highest level since May 8.