Crude oil prices swung back up on April 7 following the release of President Biden's tax plan that would end some fossil fuel subsidies, after oil prices had traded down for most of the day on pandemic concerns and rising US gasoline stocks.
Front-month NYMEX May WTI rose 44 cents to settle at $59.77/b, and ICE June Brent jumped 42 cents to $63.16/b.
Rising US gasoline inventories still weighed on the main fuels benchmark, however. NYMEX May RBOB fell 1.45 cents to $1.9518/gal, although May ULSD gained 1.38 cents to $1.8079/gal.
The US Treasury released "The Made in America Tax Plan" that plainly stated its intent for "replacing fossil fuel subsidies with incentives for clean energy production." The plan specifically targeted $35 billion in projected subsidies over 10 years, noting that "The main impact would be on oil and gas company profits."
While bearish for much of the US oil and gas sector, declining US production volumes would be bullish for crude prices. And the US Energy Information Administration was already estimating that US crude production fell from 11.1 million b/d down to 10.9 million b/d for the week ended April 2.
Likewise, the proposal was part of the wider tax plan that boosts the corporate income tax rate from 21% to 28% to help fund Biden's $2.3 trillion infrastructure package. That package supports a great deal of new funding for roads and bridges that require asphalt from heavy crude oil, proving bullish for oil demand.
Not only are more details of the plan become visible, said Edward Moya, senior market analyst for OANDA, but the markets were also realizing it is more likely to come to fruition through the filibuster-breaking budget reconciliation process.
"We're starting to get a sense that this is becoming very likely to happen," Moya said of the Democratic-led Congress. "They're going to exhaust negotiations with Republicans pretty quickly and move to push forward with this sooner than most people predicted."
Crude prices rallied April 7 after more bearish news earlier in the morning.
First, weekly US inventories data showed US gasoline stocks rising by greater volumes than commercial crude stocks fell in the week ended April 2.
Then, European health regulators cited a "possible link" between the AstraZeneca COVID-19 vaccine and rare cases of blood clots. The news resulted in the United Kingdom halting that specific vaccine's distribution to those under age 30.
"Europe's COVID vaccine rollout has been very disappointing and today's announcement that the UK will offer alternatives to people under 30 could lead to further vaccine hesitancy," Moya said.
US gasoline stocks rose by 4 million barrels to about 234.6 million barrels, while commercial crude inventories dropped by 3.5 million barrels to 498.3 million barrels for the week ended April 2, according to the EIA. US crude exports jumped from 3.17 million b/d to 3.43 million b/d, helping to draw commercial crude stocks.
The data indicated the US refining complex was further recovering from both the historic Texas freeze in February and the ongoing coronavirus pandemic, but demand was not yet keeping pace, analysts said.
"[A] rise in US gasoline inventories during a week that usually sees an uptick in road fuel demand as people travel during the Easter break is a negative indication and the market quickly realized it, looking behind the crude draws, therefore keeping oil price fairly stable," said Rystad Energy oil markets analyst Louise Dickson.
However, Dickson added, rising COVID-19 cases in much of the world, from Europe to India, continued to negatively impact oil markets. It was also increasingly appearing that it may take until the summer before more progress is made on the global vaccine rollouts.
"For the oil market to recover, the world needs further progress in fighting the pandemic, a slowing infection count and a gradual withdrawal of lockdowns and restrictions," she said. "Oil prices are understandably held back from robust growth until the needed pandemic breakthroughs are in place."
Geopolitically, crude prices were also weighed down by early progress on talks for the US and Iran to reestablish the 2015 nuclear accord, as well as the plans of the OPEC+ group to further unwind its production cuts in the next few months.
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