Slight increase: People walking past an Opec logo during a climate change conference. Opec has agreed to increase output slightly in December, but it also paused further hikes in the first quarter, wary of a supply glut. —Reuters
SINGAPORE: Oil prices rose yesterday on optimism that the US government shutdown may end soon and lift demand in the world’s top oil consumer, offsetting concerns about rising supplies globally.
Brent crude futures rose 47 US cents, or 0.74%, to US$64.10 a barrel, while West Texas Intermediate crude (at press time) was at U$60.25 a barrel, up 50 US cents, or 0.84%.
An end to the historic US government shutdown, now in its 40th day, is within reach as the Senate on Sunday moved toward a vote on reopening the federal government.
“The imminent reopening is a welcome boost, restoring pay to 800,000 federal workers and restarting vital programmes that will lift consumer confidence, activity and spending,” IG market analyst Tony Sycamore said.
“This should also help improve risk sentiment across markets” and cause a rebound in WTI prices toward US$62 a barrel, he said.
Brent and WTI fell about 2% last week and notched their second weekly decline, on fears of a supply glut.
The Organisation of the Petroleum Exporting Countries and their allies or Opec+ agreed to increase output slightly in December, but it also paused further hikes in the first quarter, wary of a supply glut.
Crude inventories are also on the rise in the United States while the volume of oil stored on board ships in Asian waters has doubled in recent weeks after tightening Western sanctions curtailed imports to China and India and as a shortage of import quota curbed demand from independent Chinese refiners.
Indian refiners have turned to the Middle East and the Americas to replace sanctioned Russian supply.
Russian oil producer Lukoil is facing mounting disruptions as a US deadline for companies to cut off business with the Russian oil company looms on Nov 21 and after a hoped-for sale of the operations to Swiss trader Gunvor collapsed.
US President Trump’s decision to grant Hungary a one-year exemption from US sanctions on Russian oil imports added to global oversupply concerns, Sycamore said.
Blomberg earlier reported that under the agreement to end the shutdown, US Congress would pass full-year funding for the departments of Agriculture, Veterans Affairs and Congress itself, while funding other agencies through Jan. 30.
The bill would provide pay for furloughed government workers, resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown.
The news agency said the approaching resolution of the 40-day shutdown mirrors that of past showdowns where the party attempting to leverage a government closure for policy victories ends up without a victory.
Trump failed to secure border wall funding through the 2018-2019 shutdown and Republicans failed to repeal Obamacare during the 2013 closure.
Democrats this year voted 14 times to block a no-strings stopgap measure passed by the House on Sept 19 that would have kept departments and agencies open through Nov 21.
Last Wednesday, the shutdown became the longest in US history, exceeding the 35-day closure in 2018 and 2019 under the first Trump administration.
The shutdown consequences are costing the US economy about US$15bil a week. —Agencies
