-Brent maintains shaky hold on $50 per barrel
-U.S. stimulus package gets a resounding “meh.”
Crude oil prices suffered another down day in Tuesday trading. Concerns about a new variant of COVID-19 spreading through the United Kingdom has effectively closed the island nation off to the rest of the world. Meanwhile, a massive stimulus package passed in the U.S. Congress is underwhelming to investors and the general public alike. Elsewhere, we see Iran growing more confident about a return to the oil market by courting Russia’s energy minister.
Crude oil prices plummeted in the previous session after news of a mutated strain of COVID-19 bruised investor confidence. U.S. crude moved lower, but spent much of the day searching for traction. The price for Brent crude oil is holding on to the psychological benchmark of $50 per barrel, though that hold was slipping. The global benchmark was down about 1.4% as of 1:47 pm ET to trade at $50.21 per barrel.
European Justice Commissioner said Tuesday that bloc members were encouraged to take coordinated action to discourage non-essential travel between the United Kingdom and members of the European Union. He went on to say, however, that a blanket travel ban was not in the cards.
“While precautions are needed to contain the spread of the new coronavirus variant, with today’s Recommendation, we therefore ensure that the restrictions are coordinated and provide for the necessary exemptions for citizens and residents returning home and other essential travelers,” he said in a statement.
Beginning Jan. 1, when the U.K. begins its formal transition out of the EU, only essential travel would be permitted unless the EU added it to its “safe country” list. That could complicate trade and other exchanges should border restrictions continue. With the call to allow freight and other transport between the EU and U.K., however, the FTSE 100 was up by about a half percent on Tuesday.
In the United States, wrangling continues over a massive stimulus and spending bills that provide American taxpayers with roughly half the level of fiscal support than previous legislation. A massive 5,000+ page bill is a bloated wish list that includes everything from spending for new museums and art centers in the nation’s capital to billions of dollars in aid to foreign countries. Sensing the notable gap between the fiscal support for taxpayers and aid to countries such as Ukraine, social media was lit up with calls for President Trump to veto the bill. That’s either profound irony given the steady calls for support or a brilliant effort by lawmakers to stonewall the measure. Regardless, it does little to support investor confidence in the U.S. economy.
“The storm clouds are growing darker and the worst may be yet to come,” Chris Rupkey, the chief economist at MUFG in New York, told the Reuters news service on Tuesday. “The new coronavirus outbreak means the economy will be flirting with disaster in the first quarter of 2021 where a downturn is possible despite Congress throwing more money our way.”
In the OPEC+ circle, we saw Saudi Arabia and Russia confirm their commitment to a production strategy aimed at avoiding deep losses in the price of crude oil. For Saudi Arabia, the de facto head of OPEC, the deal could hold until at least 2022. That’s supportive to the fragile economy, but also something of an exercise in herding cats. Now it’s Iran’s turn to discuss market issues with Russia. With President-elect Joe Biden widely expected to make a pitch for re-engaging Iran on nuclear issues, Iranian Oil Minister Bijan Zangeneh said Mocow and Tehran should work together “in order to neutralize the consequences of sanctions.” Deeper in the geopolitical arena, meanwhile, Iran said it was ready to welcome Russia into its energy space as an investor, a move that would anchor Moscow firmly on the fringe of the Western sphere of influence.
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