FXTM information and reviews
IronFX information and reviews
Libertex information and reviews
FXCC information and reviews
Markets.com information and reviews
FxPro information and reviews
42 167.25

Oil eases ahead of Lunar New Year

11 February 2021

Oil benchmarks are moderating at the time of writing, as markets await industry reports by the International Energy Agency (IEA) and OPEC respectively. Note that these reports come as oil markets have had a fabulous February thus far. Until today, Brent futures posted 8 consecutive days of gains and the active contract is still trading around its highest levels since July 2019, despite today’s drop. The global benchmark for oil prices has soared by nearly 11 percent on a month-to-date basis.

Meanwhile, crude oil is also moderating but remains near its highest levels since January 2020. WTI futures also wrapped up 8 straight days of gains, which was its longest winning streak since February 2019. With crude having advanced by over 11 percent so far this month, the US benchmark for oil prices now has the psychologically-important $60/bbl mark firmly in its sights.

However, note that both oil benchmarks have entered far into overbought territory, with their respective 14-day relative strength indexes having breached the 70 line. Such a technical indicator indicates that these prices are ripe for a pullback, even though the momentum (MACD) still points north.

What investors want to know from the IEA, OPEC reports?

The IEA and OPEC are both set to release their global estimates on supply and demand. Markets are eager to know whether these latest monthly reports, both due later today, can justify the optimism that has already been baked into oil prices.

As the vaccine continues being rolled out across major economies, despite complications in Europe and South Africa, such efforts have prompted investors to believe that economic conditions are firmly on the path towards recovery. As more of the global population is vaccinated, that should bring with it the easing of virus-curbing measures, the ramping up of factory production, as well as potentially more travelling and commutes; the resumption of these economic activities would mean more oil is consumed.

The soon-to-be-released reports by the IEA and OPEC have to uphold similar hopes for the global demand recovery, or risk unwinding some of the recent gains in oil prices.

Uncertainties still feature in demand outlook

For the time being, investors are having to digest some mixed signals out of major economies. China’s air traffic has seen a significant contraction ahead of the Lunar New Year. The week of 18 January, scheduled airline capacity was at 13 million. Two weeks later, that figure fell by 4 million seats, down to 9 million. At a time when billions of trips are typically made crisscrossing China for the festivities, many are staying put due to lingering concerns over the coronavirus. Although some 1.15 billion trips are still expected to take place during the 2021 Lunar New Year holidays, that’s still 60% lower than 2019’s tally, and also 20% lower than 2020’s figures.

Meanwhile, US crude stockpiles posted a much larger-than-expected drop last week, according to data by the US Energy Information Administration. US inventories fell by 6.65 million barrels, compared to market expectations for a decline of 800,000 barrels. However, demand for gasoline in the States last week was still lower by 10% compared to the same period in 2020.

Oil bulls pin hopes on Saudi support, US fiscal stimulus

At least oil bulls can take heart from Saudi Arabia’s incredible demonstration of its willingness and ability to spur prices higher. Earlier this year, it decided to deepen its supply cuts by 1 million barrels per day for February and March.

Such a bold move helped Brent futures to post a year-to-date climb of more than 17 percent while WTI futures have surged by almost 20 percent for the same period. OPEC+ will be meeting again in early March to decide on output levels for April.

Then there are expectations for more incoming US fiscal stimulus as well, which should help the world’s largest economy get back on its feet. As long as markets are not dissuaded from expecting more government financial aid for the US economy, that should help oil hold on to much of its gains.



Trading the BoE and FOMC meetings
Trading the BoE and FOMC meetings

The FOMC and the BoE meeting are firmly in our sights now, and positions and exposures will need to be managed accordingly. Certainly, the FOMC meeting could...

22 Sep 2021

Stocks bounce back after Evergrande panic
Stocks bounce back after Evergrande panic

As investors increasingly liken the Evergrande crisis with the collapse of the Lehman Brothers in 2008, they remain in the dark about the Chinese government's intentions...

21 Sep 2021

Oil Was Put on Hold
Oil Was Put on Hold

The oil price is falling after rallying before. Early in another September week, Brent is trading at $74.50 and has a lot of room to correct. The strong greenback...

20 Sep 2021

Dollar starts Fed week on front foot, stocks hit by Evergrande fallout
Dollar starts Fed week on front foot, stocks hit by Evergrande fallout

Fears of global contagion from the worsening crisis in China's property sector continued to weigh heavily on sentiment at the start of trading on Monday as markets...

20 Sep 2021

Dollar jumps, gold slumps, stocks nervous
Dollar jumps, gold slumps, stocks nervous

Worries that the US consumer is rolling over were dealt a major blow yesterday after the nation’s retail sales for August overpowered some gloomy forecasts. The retail sales...

17 Sep 2021

Energy is the play: how we get to $100 crude
Energy is the play: how we get to $100 crude

Natural gas futures in Europe and the UK are flying, while our natural gas (NG) CFD (the underlying is traded on the NYMEX) pushed over $5.60 and into 7-year highs...

16 Sep 2021

Forex Forecasts

OctaFX information and reviews
HotForex information and reviews
XM information and reviews
FXCM information and reviews
Vantage FX information and reviews
Vantage FX
Moneta Markets information and reviews
Moneta Markets

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.