Oil prices held all their gains at the start of Thursday’s trading session. Oil traders are staying long amid reports showing supporters of President Trump storming the US Capitol.
What you should know
At the time of drafting this report, Brent crude was up 0.70% to trade at $54.68 a barrel after gaining 1.3% on Wednesday and U.S. West Texas Intermediate (WTI) was also up by 0.79% to trade at $51.03 a barrel.
- The U.S based oil contract rose 1.4% on Wednesday.
- Trump supporters stormed the U.S. Capitol yesterday, sending it into a shutdown, as Vice President Mike Pence refused a demand from President Trump to cancel his election loss to Joe Biden, before police kept the situation under control.
What they are saying
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing fundamentals keeping oil prices above $50 per barrel.
- “Oil is still holding up well supported by the anticipated Blue Wave stimulus effects and the surprising announcement by Saudi Arabia of a voluntary one-million-barrel production cut for February and March, even though the not-too-rosy DOE builds in both gasoline and distillates more than negated the draw in oil. Gasoline and jet fuel remain the main drag on the demand recovery. US crude inventories fell by a whopping 8.0mb w/w. Strong crude exports of 3.6mbd resulted in low net imports overall, well actually shocking enough oil exports from Saudi Arabia plunged to zero for the first time.”
Oil traders might be a little fretful about chasing the move above WTI at $51, with COVID-19 cases re-emerging in some provinces of China and the possible ramp-up of US oil prices.
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.
- 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.
“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.
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.
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.
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.”
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.
Oil prices drop amid fears on energy demand softening
West Texas Intermediate, lost 1.6%, at $52.27 per barrel. It was WTI’s worst daily plunge slide since last Friday when it fell 2.2%.
Oil prices fell their most in a week after the first U.S. crude build in six weeks on the fear that the world’s largest economy might distort energy demand/supply rebalancing.
What you must know: U.S based oil contract, West Texas Intermediate, lost 1.6%, at $52.27 per barrel. It was WTI’s worst daily plunge since last Friday when it fell 2.2%.
- But for the week itself, the U.S. crude contract lost about 0.2%.
- British based Brent, the global benchmark for crude, settled 1.4%, at $56.10.
- The gain in crude oil inventories coincided with President Joe Biden’s recent statements calling on its citizens for tough days ahead from the Covid-19, which could kill up to about half a million Americans.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave valid insights on the effect COVID-19 and other macros have on oil prices.
“Oil prices look a tad vulnerable to potential profit-taking after US crude stockpile bearishly rose 2.56 million against consensus draw. Simultaneously, the near-term China crude demand forecast looks high and susceptible to revision lower as lockdown spread in the country ahead of the Lunar New Year
.“While oil traders see through longer lockdowns on the premise that vaccinations will quickly lead us out of the pandemic, COVID mobility clampdowns still hurt the very near-term view.
“And since calls for a commodity supercycle have been many after the November vaccine turnaround, open interest in Brent and WTI has increased hugely, suggesting that the market remains very susceptible to any potential bearish headlines big or small, from a positioning perspective alone.”
What to expect: OPEC production at the moment remains well below the level required to meet anticipated demand. It should continue to drive a reduction in oil inventories as the global economy gradually recovers.