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Oil optimism could be derailed by Covid risks

Oil producer group OPEC left its 2021 forecast for crude demand growth unchanged on expectations of an economic recovery. But that could change, warns energy expert Dan Yergin. He said that a lot hinges on how effective the coronavirus vaccines are, and whether the number of Covid-19 cases continue to surge. Hopes of increased oil demand were also lifted on Thursday when U.S. President-elect Joe Biden released a hefty $1.9 trillion Covid-19 rescue package designed to support households and businesses. In addition to the stimulus package, two factors have also fueled optimism. One is of course, vaccinations — in the sense that eventually this crisis is going to end. Second is Saudi Arabia’s plan to cut 1 million barrels a day — partly because they are worried about the impact of the surge in virus that’s occurring. OPEC members and their non-OPEC allies, an alliance referred to as OPEC+, cut oil production by a record amount in 2020. They did so in an effort to support prices, as Covid-19 restrictions worldwide and the subsequent plunge in air travel led to a fuel demand shock. (CNBC)

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Asia’s emerging markets could become a casualty as a result of U.S. President-elect Joe Biden’s latest $1.9 trillion Covid relief plan. That is according to James Sullivan, head of Asia ex-Japan equity research at JPMorgan. Biden recently revealed the breakdown of his proposed package, titled the American Rescue Plan, which includes measures aimed at sustaining families and firms until vaccines are widely distributed. The plan includes stimulus checks as well as unemployment support. JPMorgan previously forecast a two-percentage point drag on U.S. GDP as a result of the lack of fiscal stimulus. With Biden’s $1.9 trillion plan now coming in at more than twice the amount expected by JPMorgan, it will be a “positive surprise” for the market as well as for overall levels of economic growth in the U.S. China’s markets — among the top performers regionally in 2020 — could be among the first to be affected by this shift, Sullivan predicted. (CNBC)

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Resurgent coronavirus outbreaks will vex central bankers on five continents this week as they weigh the threat of more damage to growth against the hope that mass vaccinations will reopen economies. Institutions meeting from Tokyo to Frankfurt to Ottawa are pondering the prospect of another lost quarter amid renewed lockdowns to contain the pandemic. Most are likely to maintain current ultra-loose policy settings without committing to more easing as they keep a wary eye on the path of the disease, while crossing fingers on its eventual eradication. Like many of her counterparts, European Central Bank President Christine Lagarde put a brave face on the outlook last week, insisting that forecasts released in December are still plausible. She emphasized how previous uncertainties, such as the U.S. elections, the Brexit trade deal and the start of vaccinations, have eased. But with rates of infection spiraling higher, and new restrictions on activity being imposed throughout the world, Lagarde and her colleagues at global monetary authorities can only hope that the tantalizingly slow pace of global immunizations will pick up and finally start to dent the impact of the coronavirus. (Bloomberg) mannyrabacal1144@ gmail.com