The oil price rebounded on March 1, 2021, before retreating slightly, after the US House of Representatives authorized a $1.9trn (£1.36trn) stimulus package over the weekend. Brent crude has managed to remain relatively flat, losing only 0.08% after the slowdown in China’s factory activity growth in February capped gains.
Nonetheless, the futures market for May surged to $65.66 per barrel. Also, the US West Texas Intermediate (WTI) crude futures spiked to $62.68 a barrel. Oil prices are currently up by over 25% year to date. Chief global markets strategist at Axi, Stephen Innes, wrote in a note:
“Oil prices are recovering this morning in line with most risk assets on the back of the US stimulus bill passing the House.”
The world’s second-biggest oil user, China, said that its official manufacturing PMI missed forecasts, expanding in February at a slower pace than a month before and hitting the lowest levels since May 2021.
Based on data from the National Bureau of Statistics (NBS), the official manufacturing Purchasing Manager’s Index (PMI) dropped to 50.6 from 51.3 in January. However, it remained above the 50-point mark that separates growth from contraction.
Johnson & Johnson’s (JNJ) approval of the COVID-19 vaccine also supported oil prices over the weekend, after a US Centres for Disease Control and Prevention advisory panel went on to vote unanimously to recommend the jab for widespread use.
J&J plans to ship over 20 million doses by the end of this month and 100 million by mid-year. That amount is enough to vaccinate around 30% of Americans.
The price action comes ahead of a meeting scheduled for later this week, where the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will discuss when to allow as much as 1.5 million barrels per day of crude oil back into the market.
ING analysts say that OPEC+ must be careful to avoid surprising traders by releasing a lot of supplies back into the market. Innes concluded:
“More supply needs to come onto the market to ensure OPEC+ meets incremental demand and keeps internal discipline ducks in a row.”
How high will oil go in March?