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Rail tank cars sit near the Motiva Enterprises Refinery in Port Arthur. The price direction for crude oil this week could be influenced largely by refinery activity along the Gulf Coast and the impact of the latest stimulus package, analysts said.
Luke Sharrett, Bloomberg / BloombergThe price direction for crude oil this week could be influenced largely by refinery activity along the Gulf Coast and the impact of the latest stimulus package, analysts said.
The passage of President Joe Biden’s $1.9 trillion stimulus bill means that some 90 percent of individual taxpayers could receive payments of up to $1,400 in their bank accounts as early as this week. Saad Rahim, a chief economist for commodity trading house Trafigura, said that with vaccinations picking up steam, those stimulus checks could translate to trillions of dollars pumped into the U.S. economy by way of travel and leisure spending.
“We will be watching to see if more states lift restrictions on movement, dining, hospitality and leisure, which again should boost demand, especially for gasoline,” he said.
Stronger consumer demand would be bullish for the price of oil. The Energy Department reported that consumption of petroleum products over the four-week period ending March 5 was down 7.1 percent from the same period last year. That slump could be a lingering impact of a February freeze in Texas that idled much of the regional refinery sector, though demand levels remain stifled by the pandemic.
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Refineries are operating at about 64 percent of their capacity, down some 20 percent from early February, before the Texas cold snap. The slow return has skewed the market. Commercial crude oil inventories increased by 13.8 million barrels during the week ending March 5, while gasoline storage levels decreased by 11.9 million barrels.
For crude oil, storage levels are about 6 percent above the five-year range, while gasoline inventories are about 6 percent below the five-year average for this time of year.
“If gasoline continues to draw though, that would be a major bullish factor,” Rahim said, because refineries will eventually have to buy more crude oil to replenish stocks and meet the projected growth in demand.
Tamas Varga, an analyst at London oil broker PVM, said he too would be watching U.S. gasoline and crude oil inventories this week. The high price for crude oil and refined products, which have been supported for weeks by the weather-related outages in Texas, could encourage refineries to draw on crude oil stocks, which would be supportive of higher oil prices in the week ahead.
Another round of stimulus checks could help offset the impact of the high price of commodities. But retail gasoline prices in particular are running hot, which would discourage spending on other goods, particularly as U.S. consumers look to break out from a year of social restrictions. And the concern is that if the government puts more and more money into a still under-performing economy, it could diminish the value of the U.S. dollar and spill over into commodity prices.
The value of the dollar is inversely related to the price of oil; the weaker the spending power of the dollar translates to higher commodity prices.
The price for West Texas Intermediate, the U.S. benchmark for the price of oil, ended the week down some 0.7 percent to finish trading Friday at $65.61 per barrel.
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March 15, 2021 at 05:40PM
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Stimulus checks, demand signals to influence oil prices this week - Houston Chronicle
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