Oil futures rose Wednesday, looking to extend a winning streak on upbeat expectations about another large round of U.S. government spending and after industry data showed a large drop in crude inventories.
West Texas Intermediate crude for March delivery rose 36 cents, or 0.6%, to $58.72 a barrel on the New York Mercantile Exchange, putting the U.S. benchmark on track for an eight-day winning streak. April Brent crude, the global benchmark, was up 46 cents, or 0.7%, at $61.55 a barrel on ICE Futures Europe, on track to extend its winning streak to nine days.
“As Brent prices rise above $60 a barrel, there is little reason to doubt that demand fundamentals will justify further recovery in oil prices to long term equilibrium of $65 a barrel and likely beyond by year-end as we are just starting to rev up the U.S. reflation trade engines,” said Stephen Innes, chief global markets strategist at Axi, in a note.
The so-called reflation trade is being driven by expectations for another large dose of fiscal stimulus by the U.S. with President Joe Biden calling for an aid package worth $1.9 trillion to boost recovery from the coronavirus pandemic. A final package is expected to be shy of that price tag but closer to it than had previously been expected.
Meanwhile, the American Petroleum Institute reported late Tuesday that U.S. crude supplies fell by 3.5 million barrels for the week ended Feb. 5, according to sources. However, the data also showed gasoline stockpiles up by 4.8 million barrels, while distillate inventories declined by 487,000 barrels.
Crude stocks at the Cushing, Okla., storage hub, meanwhile, edged down by 1.4 million barrels for the week, sources said.
More closely followed inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA are expected to show crude inventories down by 2.7 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also shows expectations for an inventory increase of 2.7 million barrels for gasoline and a decline of 1.7 million barrels for distillates.