Oil Prices Remain Steady Despite U.S. Stimulus Package
Oil prices remained steady on Tuesday, December 12th, despite the U.S. Congress passing a $900 billion stimulus package. The package, which was passed late Monday night, includes $600 direct payments to individuals and $300 in weekly unemployment benefits.
The news of the stimulus package had little effect on oil prices, which have been relatively stable in recent weeks. Brent crude, the international benchmark, was trading at $50.41 a barrel, up 0.2% from the previous day. West Texas Intermediate (WTI), the U.S. benchmark, was trading at $47.37 a barrel, up 0.3%.
Oil Demand Remains Weak
Oil demand remains weak due to the ongoing coronavirus pandemic. Global oil demand is expected to decline by 8.8 million barrels per day (bpd) in 2020, according to the International Energy Agency (IEA). This is the largest annual decline in oil demand since the IEA began tracking data in 1980.
The IEA also expects global oil demand to remain weak in 2021, with demand expected to decline by 1.2 million bpd. This is due to the continued impact of the pandemic on the global economy.
OPEC+ Agrees to Increase Production
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to increase production by 500,000 bpd in January. This is the first increase in production since April, when OPEC+ agreed to cut production by 9.7 million bpd.
The decision to increase production was made in order to offset the expected decline in demand due to the pandemic. OPEC+ is expected to review the production cuts in February and could decide to further increase production if demand remains weak.
U.S. Oil Production Continues to Decline
U.S. oil production continues to decline due to the low price of oil. U.S. oil production is expected to decline by 1.2 million bpd in 2020, according to the U.S. Energy Information Administration (EIA). This is the largest annual decline in U.S. oil production since the EIA began tracking data in 1983.
The EIA also expects U.S. oil production to decline by another 0.5 million bpd in 2021. This is due to the continued low price of oil, which has made it unprofitable for many U.S. producers to continue operating.
Oil Prices Expected to Remain Stable
Oil prices are expected to remain relatively stable in the near term. The OPEC+ agreement to increase production is expected to offset the expected decline in demand due to the pandemic.
At the same time, the U.S. stimulus package is expected to provide a boost to the global economy, which could lead to an increase in oil demand. This could lead to higher oil prices in the future.
Oil Market Outlook
The outlook for the oil market remains uncertain due to the ongoing coronavirus pandemic. Global oil demand is expected to remain weak in 2021, while U.S. oil production is expected to continue to decline.
At the same time, OPEC+ is expected to review its production cuts in February and could decide to further increase production if demand remains weak. This could lead to lower oil prices in the future.
Overall, oil prices are expected to remain relatively stable in the near term. The OPEC+ agreement to increase production is expected to offset the expected decline in demand due to the pandemic. The U.S. stimulus package could also provide a boost to the global economy, which could lead to an increase in oil demand and higher oil prices in the future.