(Bloomberg) — Oil is set for the biggest weekly gain since February on bullish signs for the market, with focus turning to the outlook for U.S. stimulus.
Futures in New York edged toward $68 a barrel and are up almost 9% for the week, even after retreating on Thursday. The market has been buoyed in part this week by China’s containment of its latest Covid-19 outbreak, while banks including UBS Group AG (SIX:) reiterated confidence in the outlook. Focus now turns to a speech from Federal Reserve Chair Jerome Powell on Friday for insights into how the central bank may scale back bond purchases.
Investors will also be watching Tropical Storm Ida, which has already started shutting offshore oil output in the Gulf of Mexico and could cause billions of dollars of damage as it grows into a hurricane and makes landfall next week.
Oil has had a volatile August with the fast-spreading delta variant of the virus leading to renewed restrictions on mobility and clouding the outlook for fuel demand. OPEC+ is scheduled to meet next week after agreeing to keep adding supply until all of its production curbs are revived, and the market will be watching for any change to its guidance.
Three of the Fed’s leading hawks urged policy makers move quickly to slow asset purchases despite the risk of delta. The dollar held a gain. A stronger U.S. currency makes commodities such as oil less attractive to investors.
Oil and gas explorers in the U.S. Gulf of Mexico including BP (NYSE:) Plc and Royal Dutch Shell (LON:) Plc have begun shutting production ahead of Ida. Based on the latest forecast by the National Hurricane Center, the storm will be at least a Category 2 hurricane by the time it makes landfall near New Orleans.
The prompt timespread for was 93 cents a barrel in backwardation — a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 38 cents on Monday.
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