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OIL FUTURES: Crude prices rally on US stimulus hope, but COVID-19 surge caps rally

Highlights

Pelosi 'optimistic' on stimulus negotiations

COVID-19 surge pushes Ireland to full lockdown

US dollar tests one-month lows

New York — Energy prices settled higher Oct. 20 amid signs of progress on a US coronavirus stimulus bill, but demand outlooks remained under pressure amid renewed social restrictions in Europe.

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NYMEX November WTI settled 63 cents higher at $41.46/b and ICE December Brent climbed 54 cents to settle at $43.16/b.

Oil prices, which were trading in negative territory early in the session, turned higher midday after House Speaker Nancy Pelosi said she was "optimistic" that a stimulus bill could be passed ahead of the November elections.

"House Speaker Pelosi's stimulus deadline initially seemed unlikely to yield a breakthrough, but Republicans seem to be making some large concessions," OANDA senior market analyst Edward Moya said in a note. "A lot needs to go right for a deal to get done this week and the biggest hurdle might come from Senate Republicans."

NYMEX November RBOB settled 2.56 cents higher at $1.1879/gal and November ULSD was up 1.54 cents at $1.1735/gal.

Pelosi on Oct. 18 had given the White House a 48-hour deadline to complete negotiations in order to get a bill passed ahead of the elections.

Improved outlook for increased stimulus spending weighed on the US dollar, adding further support to commodity prices. The ICE US Dollar Index was testing one-month lows at around 93.09 in afternoon trading.

The front-month ICE New York Harbor RBOB crack against Brent climbed to around $6.06/b.

But risks to the demand outlooks posed by rising global COVID-19 coronavirus cases capped the rally.

These demand risks intensified overnight after Irish Prime Minister Micheál Martin announced late Oct. 19 that his nation would begin a six-week nationwide lockdown from Oct. 21. While a number of European countries have reimposed social restrictions in recent weeks, Ireland is the first to return to full lockdown.

In the US, the seven-day average of new coronavirus infections reached 57,415 on Oct. 19, according to data from The COVID Tracking Project, the highest level since Aug. 4.

Supply outlooks also remained under pressure as the OPEC+ alliance prepares to to ease their 7.7 million b/d collective production cuts by about a quarter to 5.8 million b/d at the start of 2021.

With six weeks to go before the full 23-member OPEC+ alliance meets to consider its 2021 production plans, the group's Joint Ministerial Monitoring Committee said Oct. 19 that it was closely following market trends and would not hesitate to call for further supply restraint if needed.

Fading demand growth and the resurgence of Libyan supplies have muddied the path to stable, higher oil prices.

"The market is increasingly pricing in an OPEC+ delay to the planned tapering of their curtailment deal," TD Securities analysts said in a note. "We argue that a failure to do so would endanger a fragile rebalancing amid a second [COVID] wave."