Oil bears at the upper hand at last week trading session cumulatively. The bears took hold of prevailing macros that continually disrupt the fragile energy market negatively amid rising cases of COVID-19 infections and partial restrictions cited in certain emerged markets.
The American traded oil contract WTI futures closed at $39.85 per barrel. On W/W, the West Texas Intermediate futures dropped by 2.5%.
Not forgetting the London traded oil contract, Brent crude settled at $41.77 losing over 2.5%
Oil traders are presently unsettled on the macro that the number of cases in the world’s largest economy took another turn a few days ago when the U.S. reported more than 70,000 COVID cases for the first time in 90 days and its present trajectory suggests more upside in the coming days, thereby leading oil bulls arbitrarily exhausted around $42-$43.12 /barrel price levels, as recent price action revealed buying pressure at that area collapsed momentarily.
Such reaction seen of late in crude oil prices are attributed to the bias oil traders see a surge in COVID-19 caseloads as a major determinant contributing to weak (and weakening) gasoline demand globally especially in Western Europe and the United States, further meaning that Brent crude could likely be stuck at $40/barrel in the near term until the newly registered COVID-19 vaccine comes to play.
On the supply side, oil traders are keenly watching the oil cartel’s next move as reports suggest OPEC+ is planning to cut oil production by 5.7 million barrels per day in January as against the initially agreed output cut of 7.7million barrels per day.
Such significant increase will surely weigh on crude oil prices in the mid-term and put energy demand/supply rebalancing in jeopardy amid weakening economic activities prevalent in many global economies, as the COVID-19 virus onslaught continue ticking up at an alarming rate.
Although credited should be given to OPEC+ most powerful leader, Vladimir Putin who had come to the ailing oil bulls rescue in the last few days by pledging his resolve in supporting crude oil prices, if the need ever arises, helped restore calmness at the crude oil market, meaning oil prices are most unlikely to fall to levels seen in March and April on the basis that the Saudis and Russians remain resolute in keeping oil prices above the $30-$35/ barrel price levels in the worst-case scenario.
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This article was originally posted on FX Empire