Oil prices are hitting a weekly high after US president Donald Trump tweeted reassuring news on a fiscal stimulus plan while the threat of Hurricane Delta affects US oil production.
“Oil markets traded sideways overnight, as an unexpected rise in US Crude Inventories was offset by the Trump stimulus tweets and the threat of Hurricane Delta affecting US oil production,” said Jeffrey Halley, senior market analyst for the Asia Pacific at OANDA.
Overnight, oil prices were initially hit by a slightly larger-than-expected build in US crude inventories, rising by 501,000 barrels in the week to 2 October to 492.9 million barrels. That’s compared to analysts’ expectations in a Reuters poll for a 294,000 barrel rise.
“The recent oil rally is probably dependent on whether Hurricane Delta, currently a category-1 storm, strengthens as forecast to a category-3 storm. If Delta stays weak, the oil rally could quickly run out of steam.”
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He added that if the initial and continuing job claims data out later in the US is weak then it could “muddy the US consumption picture and additionally, cap price gains.”
Oil prices have been hit this year as the COVID-19 pandemic has raged around the world, with fewer people using cars, which has driven prices down. Despite the overall trend for demand falling, there have been pockets of gains.
Prices could be further propped up by news out of the Middle East.
“Amid reports that Saudi Arabia is poised to return to its strategy earlier this year of ramping up oil production, the proof appears to be in the pudding with industry watchers reporting a significant increase in flaring across the peninsula,” said Stephen Innes, chief global market strategist at Axi.
“The satellite data tracks anything hotter than 315°C (600°F), which is used as a proxy for oil production and points to a sharp increase over the past few weeks.”