Oil extends gains on hopes of U.S. stimulus and crude stocks drawdown

By Sonali Paul
MELBOURNE, Jan 20 (Reuters) - Oil prices rose in early trade
on Wednesday, adding to solid gains overnight, on expectations
the incoming U.S. administration will go ahead with massive
stimulus spending that would boost fuel demand and draw down
crude stocks.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
climbed 23 cents, or 0.4%, to $53.21 a barrel at 0155 GMT,
building on a 1.2% rise on Tuesday.
Brent crude LCOc1 futures rose 25 cents, or 0.5%, to
$56.15 a barrel, adding to a 2.1% gain on Tuesday.
U.S. President-elect Joe Biden's Treasury Secretary nominee
Janet Yellen urged lawmakers on Tuesday to "act big" on pandemic
relief spending, reinforcing hopes of massive spending to boost
growth. "Certainly the expectation is that will support better
growth and better demand in the U.S.," said National Australia
Bank's head of commodity research, Lachlan Shaw.
The oil market continued to rise despite the International
Energy Agency having cut its outlook for first-quarter oil
demand by 580,000 barrels per day, due to tight lockdowns in
Europe and border closures to stop soaring COVID-19 infections.
"That clearly vindicates the move by Saudi Arabia last week
to cut 1 million barrels per day of their own production
unilaterally for February and March," Shaw said.
"The risk right now is around coronavirus lockdowns. We've
seen some countries extending lockdowns."
Germany on Tuesday extended a lockdown for most shops and
schools for another two weeks, to Feb. 14. Traders will be watching out for U.S. crude and products
inventory data due from the American Petroleum Institute on
Wednesday and from the Energy Information Administration on
Friday.
Six analysts polled by Reuters estimated, on average, that
crude stocks fell by 300,000 barrels in the week to Jan. 15, but
expect gasoline stockpiles rose by 3.0 million barrels.
Distillate inventories, which include diesel, heating oil and
jet fuel, were seen up by 800,000 bbl.