Oil prices up as markets await higher stimulus in US

Oil prices were up on Wednesday as markets await the announcement of a higher US relief package during the US President-elect's inauguration speech later Wednesday, although rising coronavirus cases are capping upward price movements.

International benchmark Brent crude was trading at $56.34 per barrel at 0656 GMT for a 0.79% rise after closing Tuesday at $55.90 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $53.46 per barrel at the same time for a 0.91% increase after it ended the previous session at $52.98 a barrel.

An upward oil price movement was spurred ahead of US President-elect Joe Biden's announcement of a $1.9 trillion aid package pledge during his inauguration speech on Wednesday.

Hopes for additional stimulus relief were further prompted after incoming Treasury Secretary, Janet Yellen, said aid for those most in need, coupled with expanded unemployment insurance, would have the biggest economic impact in the immediate term, giving Americans "the biggest bang for the buck" meaning value for money.

The benefits of a big package outweigh the costs of a higher debt burden, she said.

The International Energy Agency's (IEA) on Tuesday released its monthly oil report and forecast that global oil demand would increase by 6% in 2021.

The agency said the resurgence in COVID-19 cases is slowing the rebound, but a widespread vaccination effort and acceleration in economic activity are expected to spur stronger growth in the second half of the year.

Although the report raises hopes for long-term recovery, it also signals that demand will be under pressure from the coronavirus pandemic in the first half of the year, which would limit any positive oil price support.

Meanwhile, the strict mitigation efforts to counter the spread of the coronavirus pandemic still weigh on prices, increasing investor jitters over a demand recovery.

Germany on Tuesday decided to keep the country's lockdown in place and introduce tougher measures to fight the spread of the coronavirus.

Investors are also monitoring the concerning resurgence and related restrictions in China, the world’s second-largest oil consumer. The country announced tougher measures to stem the virus spread in the capital Beijing on Wednesday.