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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher at the mid-session on Wednesday, underpinned by expectations that the new U.S. administration will deliver massive stimulus spending that would lift demand, as well as by OPEC output curbs, additional voluntary production cuts by Saudi Arabia in February and forecasts calling for a drop in U.S. crude inventories in this week’s government report.

At 16:07 GMT, March WTI crude oil is trading $53.46, up $0.48 or +0.91% and March Brent crude oil is at $56.37, up $0.47 or +0.84%.

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Yellen Sets the Bullish Tone

Janet Yellen, U.S. President Joe Biden’s nominee for Treasury Secretary, set a bullish tone for crude oil traders when she urged lawmakers on Tuesday to “act big” on coronavirus relief spending, arguing that the economic benefits far outweigh the risks of higher debt burden.

Yellen also said that the value of the dollar should be determined by markets, a break from departing President Donald Trump’s desire for a weaker U.S. currency. This is important because crude oil is a dollar-denominated commodity. So when the dollar weakens, crude oil becomes cheaper to foreign buyers.

Yellen also made comments that suggest demand for gasoline could face some headwinds during the Biden administration. Yellen called climate change an “existential threat” to the U.S. economy and said she would appoint a senior official at Treasury to oversee the issue and assess systemic risks it poses to the financial system.

She added investment in clean technologies and electric vehicles was needed to cut carbon emissions, keep the U.S. economy competitive and provide good jobs for American workers.

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American Petroleum Institute Weekly Inventories Report

At 21:30 GMT, the API will release its weekly inventories report. It is expected to show crude stocks fell by 300,000 barrels in the week to January 15.

Short-Term Outlook

Sentiment is being supported by Yellen’s declaration for the government to “act big” on stimulus. Traders believe a surge in debt-funded spending would be a positive for the global economy, demand for crude oil and commodity prices in general. Meanwhile, it would put pressure on the U.S. Dollar that would boost foreign demand for dollar-based crude oil.

For a look at all of today’s economic events, check out our economic calendar.
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