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Crude Oil Prices Drift Higher as Market Braces for Biden's Green Agenda

CommoditiesJan 20, 2021 11:22AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Crude oil prices rose on Wednesday against a backdrop of little market-moving news, with attention focused largely on the inauguration of Joe Biden as U.S. President.

According to various reports, Biden is expected to sign an executive order later on his first day in office blocking the development of the Keystone XL pipeline, an act seemingly aimed at sending a signal that the new administration will prioritize climate change and air quality issues over the development of domestic oil and gas. Other major policy actions expected of the administration in the near term include a re-commitment of the U.S. to the Paris Climate Accord, and the ending of attempts by President Donald Trump to overturn California's new standards on tailpipe emissions.

By 11:15 AM ET (1615 GMT), U.S. crude futures were up 0.9% at $53.45 a barrel, while Brent crude, the global marker, was up 0.9% at $56.41 a barrel. Both blends are testing 11-month highs on expectation that the aggressive stimulus spending urged by Janet Yellen in her confirmation hearing as Treasury Secretary on Tuesday will translate into more robust fuel demand. 

U.S. gasoline futures were up 1.0% at $1.5535 a gallon.

Earlier, there had been some volatility caused by an Iraqi news agency report citing Oil Minister Ihsan Abdul Jabbar as saying that the country was close to an agreement with the OPEC+ bloc of producers on raising Iraq's oil exports, a move that would signify a loosening of the production discipline that has underpinned prices in recent weeks. 

The agency subsequently withdrew its report. 

“The oil minister did not make these comments and did not meet the newspaper’s reporter,” oil ministry spokesman Asim Jihad told Reuters. The original article has since been deleted, Reuters reported.

Biden's policy toward the Gulf, specifically as regards Iran, is one big policy unknown that could end up having a big impact on the global oil market, analysts at Wood Mackenzie wrote in a new report.

"Iran is an ‘elephant in the room’, capable of delivering 1 million b/d of oil exports within months – if sanctions were lifted," strategist Ann-Louise Hittle wrote. However, she added that she expects the issue "to be put on the back burner, at least until after Iran’s own presidential elections in June 2021."

Hittle, who has consistently predicted a big rebound in oil demand this year, said she expects global demand to be back at 99 million b/d by year-end, just 1 million b/d short of pre-Covid levels. She also expects Brent to be back at $60 a barrel by then. 

 

 

 

Crude Oil Prices Drift Higher as Market Braces for Biden's Green Agenda
 

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Comments (1)
Barani Krishnan
Barani Krishnan Jan 20, 2021 12:11PM ET
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"Iran is an ‘elephant in the room’, capable of delivering 1 million b/d of oil exports within months – if sanctions were lifted," strategist Ann-Louise Hittle wrote. However, she added that she expects the issue "to be put on the back burner, at least until after Iran’s own presidential elections in June 2021." -- Finally, someone acknowledges the underlying rumble in the OPEC belly. By the way, the headline, that oil is up on Biden's green agenda is one of the most ridiculous I've read in a long time.
Barani Krishnan
Barani Krishnan Jan 20, 2021 12:11PM ET
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* Referring to Reuters headline earlier in this series.
Barani Krishnan
Barani Krishnan Jan 20, 2021 12:11PM ET
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Our version of market bracing for Biden's green agenda is correct.
Matt Novakovich
Matt Novakovich Jan 20, 2021 12:11PM ET
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despite all the negative sentiment you have been spewing about the "Glut of oil" I'm up 3x on LPI. even Warren buffet dumped his OXY. he probably believed you and Reuters. Your words and the media's hatred for oil can't write articles to stop oil going to $75 a barrel. but good luck
Barani Krishnan
Barani Krishnan Jan 20, 2021 12:11PM ET
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Matt Novakovich  Unfortunately,  the next shoe (Iran) will drop on OPEC. The Russians will overproduce as always, then grin at the Saudis. Shale has already been poaching Saudi market share in China and the kingdom will wake up soon to realize that the more it cuts, the more it's going to give in to the US. Biden's stimulus is certainly the tide that lifts all boats but there is a limit to how much the market can tolerate supply imbalance versus the not-encouraging-at-all uptake in fuel. It's pure economics, Matt, nothing to do with the media's hatred for oil or Buffett's misguided call. The game-changer will of course be the virus' track and the overwhelming success of vaccines -- if it comes to that. For the good of all, I pray we can emerge from this pandemic faster than thought. But I also suspect the Iranian problem will catch up with oil faster than the recovery. Congratulations on being 3x up LPI. The contrarian does succeed through conviction, though market variables are the final arbiter.
 
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