Commodities
Crude oil prices end mixed W/W, oil traders grow wary
Crude oil prices ended the week mixed cumulatively amid surging Covid-19 caseloads.
Crude oil prices ended the week mixed cumulatively amid surging Covid-19 caseloads, as oil traders pondered on what direction crude oil prices will go.
What we know: American-based oil contract, West Texas Intermediate closed at $40.88 per barrel, gaining 0.7% on the week, although it should be noted that it dropped 0.2%, on Friday.
READ: Oil prices drop, currently on anemic demand
- British-based oil contract, Brent crude, the popular standard for oil benchmark, however, dropped for both the day and week.
- Brent Crude prices settled on Friday to trade at $42.93 per barrel, down 0.5%. For the week, the global crude gauge lost 0.2%.
The mixed result in crude oil prices is coming amidst a spike in COVID-19 cases across emerged markets that continue to weigh down on oil traders, as it is believed that the virus has curbed demand in two of the world’s biggest crude oil consuming areas.
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OPEC+ plans to reduce its current supply cuts of 7.7 million barrels per day (bpd) by 2 million bpd in January, as OPEC Secretary-General Mohammed Barkindo admits that fuel demand is looking “anemic.”
A technical committee of the OPEC+ some days ago expressed their concerns over rising oil supply, since reduced human mobility aimed at limiting the spread of COVID-19 has also curbed fuel usage.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on his outlook for the fragile energy market.
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“But the tail risk is how lawmakers deal with this Covid-19 surge and the way consumers interact remains the wild card.
“While a return to draconian confinement measures is unlikely, the most prominent threat to the economic recovery is fear of the virus, not necessarily the soft lockdowns or social gathering restrictions.
“It is fear that could keep people hunkered down until the curve flattens or the vaccine is available. And It could sound a significant downbeat to the economy.”
That said, energy consumption is starting to kick up huge in the world’s second-largest economy China. Such macro is expected to keep crude oil prices far above levels seen in April.
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Commodities
Oil prices stay resilient amid pressure from COVID-19
Oil prices rallied after industry data showed U.S. crude inventories dropped unexpectedly last week amid fears that the COVID-19 infection,
Oil prices rallied at the mid-week trading session after industry data showed that U.S. crude inventories dropped unexpectedly last week amid fears that the COVID-19 infection rates were getting out of control.
- U.S. West Texas Intermediate (WTI) rose 0.2%, to trade at $52.71 a barrel, reversing some of yesterday’s loss.
- Brent crude oil futures rallied by 0.2% to $56.02 a barrel.
What this means: Recent data retrieved from the American Petroleum Institute (API) showed crude oil inventories in the world’s biggest oil consumer, dropped by 5.3 million barrels in the week to Jan. 22 compared with analysts’ expectations in a Reuters poll for a build of 430,000 barrels.
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China’s National Health Commission revealed that the world’s largest importer of oil recorded 124 cases on Jan. 24, up from 80 earlier, which is the worst wave of new COVID-19 infections seen since March 2020.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing macros helping oil prices though other reports reveal that oil would remain under pressure amid energy demand/supply rebalancing;
“Oil received a timely fillip after the API reported that US crude supplies declined 5.3 million barrels bullishly against consensuses.
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“But problems may continue to linger under the hood as the data also reportedly indicated gasoline stock rose by near 3.1 million barrels. At the same time, the draws at Cushing make sense in backwardation markets.
“Even when mired in the pandemic’s darkest days, oil prices remain incredibly resilient in no small part due to OPEC’s dogged determination to stay in damage control mode adjusting supply constraints to alleviate the currently projected level of attrition to global demand.”
READ: Crude oil prices drop, COVID-19 cases hit 38 million
What to expect: While the general upward direction of travel in the market makes sense, it’s difficult for oil traders to make a definitive near-term shift to the next price level higher, given the very uncertain near-term demand outlook.
Commodities
Gold traders remain cautious despite urgency in $1.9 trillion stimulus plan
Gold traders are of the bias that the precious market is heading from neutral to bearish…
Gold prices at Tuesday’s trading session moved slightly higher, despite the White House’s recent statement that there’s an “urgency” to passing the $1.9 trillion stimulus plan.
What you should know: At press time, gold futures were trading at around $1860/ounce.
Gold bug’s upside this week seems to be curbed in spite of its surge last week when it rose more than $26, or 1.4%, after losing almost 3.5% in two previous weeks combined.
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- Gold traders are of the bias that the precious metal’s market is heading from neutral to bearish as recent price action reveal the potential head and shoulders chart pattern continues to form on the daily charts, and energy is building during consolidation.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke in detail on macros that could put gold prices upside limited at least for the near term:
“Gold conceded ground to stronger dollar overnight but remains bid against escalating US-China tensions over Taiwan. Gold is struggling to break out. Most short-term fundamentals suggest upside from here, but extended speculative positioning is acting as a drag.
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“We will see what progress is made on the US USD1.9 trillion fiscal stimulus package during the remainder of the week. Presumably, the smoother it passes, the more favorable for gold.”
What to expect: On the central bank front, the highlight is the FOMC decision. The FOMC meeting should be gold supportive, but not new news. Robust GDP data could weigh on gold if yields react higher.
Commodities
Oil prices fall under pressure over rising number of COVID-19 cases in China
Brent crude was down by 0.24% to trade at $55.12 barrel, and WTI futures inched down by 0.10% to $52.22 a barrel.
Oil prices drifted lower at the first trading session in London, recording a second consecutive trading session of losses, as the ever-rising number of COVID-19 cases, particularly in China, raise energy demand fears.
What you should know: At the time of writing this report, Brent crude was down by 0.24% to trade at $55.12 barrel, and West Texas Intermediate futures inched down by 0.10% to $52.22 a barrel.
China’s National Health Commission revealed that the world’s largest importer of oil recorded 124 cases on Jan. 24, up from 80 earlier, which is the worst wave of new COVID-19 infections seen since March 2020.
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Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on current fundamentals weighing on oil prices, at least for the near term. In addition, he spoke on how the COVID-19 pandemic seemed to distort the bullish rally.
“The Lunar New Year headline heebie-jeebies did a number on oil prices into weeks end. Yet after hitting an intraday low US$54.48 per barrel, Brent crude managed to close above US$55 despite the clear demand impacts of lockdowns in Europe and additional measures in China.
READ: Oil traders weigh if COVID-19 support programs will buoy economic growth
The enormous question mark remains around demand and supply.
- The street uniformly downgraded Q1 21 market in the world ex-China due to clear demand impacts of lockdowns in Europe to start the year. But last week it was back to the downward demand revision drawing board.
- More worryingly, however, since Asia has been the backbone of physical crude oil demand, this time it was to down-ballot China consumption as lockdowns spread in the country just weeks ahead of the Lunar New Year travel surge.”
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What to expect: Still, the one million barrels per day of additional Saudi curbs over February and March should alleviate the currently projected level of attrition in global demand recovery without much impact on the path of OECD inventory draws.
