Crude oil prices soared on Monday, lifted by the prospect of President Donald Trump recovering sufficiently to discharge himself from hospital as well as increased hopes of a new U.S. economic stimulus package.
By 09:30 AM ET (1330 GMT), U.S. crude futures were up 4.9% at $38.87 a barrel, while Brent was 4.4% higher at $41.00 a barrel.
Prices had slumped more than 4% on Friday amid uncertainty surrounding Trump’s health and also the political process with the election less than a month away, adding to concern that rising coronavirus case numbers could dampen the global economic recovery.
However, comments from Trump’s doctors suggesting he could be discharged from the hospital as soon as Monday have restored confidence to the market.
Additionally, House Speaker Nancy Pelosi said on Sunday progress was being made on the next coronavirus relief bill. Her comments followed Trump tweeting from his hospital bed about the need for Congress to pass the stalled spending package.
The need for a new stimulus deal is apparent with the total of coronavirus cases now exceeding 35 million globally and many countries suffering from a second wave, resulting in more restrictions to activity.
However, these oil price gains are unlikely to last for long if a stimulus package doesn’t arrive, as supply issues are starting to mount.
Libyan oil production has risen by about 20,000 barrels per day from last week to reach 290,000 bpd, Reuters reported Monday, after the easing of a blockade by Eastern forces allowed the OPEC member to ramp up exports.
This is “well above the roughly 100Mbbls/d the country was pumping prior to the lifting of export blockades. Libya still has some distance to go to get back to the more than 1MMbbls/d it was producing at the start of the year,” wrote ING analysts, in a research note.
“That very fragile supply deficit that we have looks like it’s going to be gone if Libya does produce an extra half a million (bpd) more alone,” OCBC’s economist Howie Lee said in a Reuters report.
The latest Commitments of Traders Report showed that speculators reduced their net long positions in ICE (NYSE:ICE) Brent by 6,974 lots over the last reporting week, to leave them with a net long of 97,222 lots as of last Tuesday.