Crude oil prices drifted lower at the first trading session of the week.
The plunge in oil prices is partly attributed to the increased concerns seen by a significant number of oil traders on the world’s energy demand, thus it dampened the latest macro revealing that U.S. President Donald Trump signed off on the latest COVID-19 stimulus deal.
What you should know: At the time of writing this report, Brent crude was down by 0.39% to trade at $51.17 a barrel and West Texas Intermediate futures dropped lower by 0.23% to $48.12 a barrel.
That said, crude oil prices posted their first weekly loss since October as the B.1.1.7 strain of COVID-19, alongside the discovery of another mutant strain of the virus believed to originate from South Africa, which raised more fears of more countries imposing lockdowns.
- The United Kingdom has already imposed tighter lockdown measures throughout most of the country in order to limit the spread of the virus, while the second largest economy, China, suspended passenger flights to the United Kingdom.
- However, macros revealing that President Trump has reportedly signed the $2.3 trillion COVID-19 pandemic aid and spending package, thus averting a partial U.S government shutdown, calmed some nerves in the energy market.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on macros coming from COVID-19 fronts calming the nerves of oil traders from selling below the $50 price level.
“The oil market rallied along with broader markets supported by a flat-out bullish EIA inventory report.
“And thanks to medical experts warning against overreaction to the new virus strain, there is a greater understanding it will not trigger a new wave of severe lockdown blockades around the world as France showed the way by quickly re-opening trade and transport links with the UK, which provided a major sigh of relief to oil markets for a lockdown perspective.”
Gold’s appeal up thanks to a weaker U.S dollar
More COVID-19 relief programs pushed the yellow metal’s appeal up as an inflation hedge.
Gold was up at Wednesday’s trading session, thanks to a weaker dollar coupled with statements from Janet Yellen, the incoming Secretary for the U.S Treasury, calling for more COVID-19 relief programs; these helped to push the yellow metal’s appeal up as an inflation hedge.
What you should know: At press time, Gold futures were up 0.51% at $1,849.60/ounce.
- The Secretary of the Treasury nominee made key statements during her Senate confirmation hearing held yesterday, where she discussed the economic gains of a large stimulus package that would far outweigh the risk of a higher debt burden.
- The greenback dropped for the third consecutive trading session after Janet Yellen said in her hearing that tax cuts enacted in 2017 for large companies should be reversed.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the odds that the precious metal currently has amid a relatively strong greenback.
“Maximum stimulus overdrive, favorable to bullion turnaround in taper talk and slightly weaker dollar paint an encouraging backdrop for gold prices provided real rates oblige.
“Gold has been facing headwinds from a strong US dollar and higher real rates so far this year. The market is trying to hold the yellow metal above crucial support levels, which is encouraging,” Innes stated.
What to expect: However so far, gold has struggled to recover convincingly past the $1850 psychological level, and the 50dma around $1960 remains the ultimate target Q1 for gold bulls.
Oil prices rally high on incoming COVID-19 relief program
Brent oil futures gained 0.68% to trade at $56.28 a barrel adding to yesterday’s 2.1% gain.
Oil prices were all fired up at mid-week trading session in London.
Holding on to their previous gains on reports that the incoming Joe Biden administration will offer more quantitative easing programs, boosted hopes for energy demand
What you should know: At press time, Brent oil futures gained 0.68% to trade at $56.28 a barrel adding to yesterday’s 2.1% gain. West Texas Intermediate futures rallied by 0.79% to trade at $53.40 a barrel, building on a 1.2% rise seen at the last trading session.
- Both major oil benchmarks stayed above the $50 mark.
- The Treasury Secretary nominee, Janet Yellen advised the U.S lawmakers in acting fast on COVID-19 support packages during her Senate confirmation hearing held yesterday.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics gave valuable insights on the mindset of energy traders in regards to Saudi’s recent cut and massive stimulus package on its way to financial markets stating;
“The energy markets are racing higher out of the gates in Asia aided by a lower dollar and hopes of a sizeable economic stimulus package from the Biden administration.
“Energy traders are packing in a chunky stimulus-response that might matter to investors from both a commodity and currency perspective where the US dollar could weaken to oil prices benefit since crude is priced in US dollars.
“The most favorable elixir of US stimulus and the imminent Saudi production cut bolstering efforts of OPEC+ to keep supply well below demand this year continue to help price action.”
What to expect: Ahead of presidential inauguration day, Oil traders offer up a Biden policy seal of approval on the agenda’s sequencing with vaccinations plus stimulus now and taxes later, to drive risk through the first half of 2021.
Oil traders weigh if COVID-19 support programs will buoy economic growth
Brent oil crude futures gained 0.40% to trade at $54.95 while WTI futures were dropped 0.23% to trade at $52.30 a barrel.
Oil prices were mixed at the second trading session of the week. Oil traders are cautiously optimistic that further COVID-19 stimulus programs will buoy economic growth against the increasing COVID-19-induced lockdowns sighted in key international markets.
What you should know
At press time, Brent oil crude futures gained 0.40% to trade at $54.95, while West Texas Intermediate futures dropped by 0.23% to trade at $52.30 a barrel. There was no oil settlement transaction on Monday at the world’s largest economy, due to public holiday.
- Both global oil benchmarks remained above the $50 mark.
- In addition, oil traders are treading cautiously on reports that the third-largest crude oil importer, India, recorded poor fuel sales in 2020, as well as rising numbers of COVID-19 cases in Japan and China.
What they are saying
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, dropped valuable points as regards macros weighing the black liquid hydrocarbon, taking to account the U.S dollar recorded losses at Tuesday trading session, thereby arbitrarily supporting crude oil prices.
- “Many COVID-19 jitters out here, but oil prices continue to hold and looks to nudge higher eyeing support from the weaker US dollar as oil sensitive currencies are showing the way. The US data has been less encouraging lately. However, yesterday’s Q4 China GDP data provided a festive reminder that China’s economy continues to fire on all cylinders and brought with it dip-buying support.
- “Overall, the policy mixes between OPEC+ current supply discipline coalescing with the Biden’s administration’s overarching focus on public health and economic responses to the COVID-19 pandemic, suggest oil prices can go much higher.”
What to expect
Oil traders anticipate that oil prices will stabilize near the current level, as progress is made on the COVID-19 vaccine roll-out. As the black liquid hydrocarbon moves closer on the path to a typical demand environment, oil prices will then soar.