By Geoffrey Smith
Investing.com -- Crude oil prices rose on Tuesday, as hopes of a further boost to the U.S. stimulus package pushed the dollar down to test a 32-month low.
By 9:25 AM ET (1425 GMT), U.S. crude futures were up 1.3% at $48.23 a barrel, while the international benchmark Brent was up 1.2% at $51.51 a barrel.
U.S. Gasoline RBOB Futures were up 1.2% at $1.3775 a gallon.
With little news of interest coming from the physical market, it was the macroeconomic backdrop that dominated, with the dollar's weakness front and center. A cheaper dollar tends to increase all commodity prices denominated in the world's effective reserve currency, allowing emerging economies in particular to buy more dollar-denominated currencies with their own money.
The flight into higher-yielding currencies is being driven in part by hopes that the U.S. Senate will vote to increase the direct payments to households in the recent stimulus package to $2,000 from $600, as currently foreseen. That would have the effect of supporting U.S. consumer demand more comprehensively in the short term, something that would ultimately benefit the U.S.'s trading partners.
The confluence of dollar weakness, producer discipline and optimism about an economic recovery in 2021 have driven prices higher by some 50% in the last two months of 2020, with financial participants playing a major role. Data released by the Commodity Futures Trading Commission on Monday showed that the net speculative long position in crude futures rose to nearly 526,000 contracts last week, the highest level since early August.
At 4:30 PM ET, the American Petroleum Institute will release its weekly assessment of U.S. oil inventories, although analysts point out that the numbers come with a big health warning.
"Year-end effects, notably driven by tax treatment of inventories held into the New Year in Texas, combined with holidays, make the final data set of the year always wacky," said Paul Sankey of Sankey Research in emailed comments.
According to the API's reckoning, U.S. crude inventories have risen for the last six weeks in a row and are still over 50 million barrels higher than at the same point in any of the last three years. However, Sankey pointed out that: "one thing is for sure, the inventory situation is absolutely primed for a return of jet fuel demand, as refiners have driven inventory levels to historic lows."
Jet fuel inventories are currently at the lower end of their range over the last five years, according to government data. In part that's because air travel numbers have stayed surprisingly robust over the holiday period: according to the Washington Post over 1 million Americans flew on each of the three days over the Christmas weekend, more even than during the Thanksgiving weekend this year.