Oil prices held most of their gains at the start of trading in London. This is happening amid rising numbers of COVID-19 cases globally, which has weakened some traders’ resolve in betting bullish.
The number of global COVID-19 cases surpassed 90.87 million as of Jan. 12, according to Johns Hopkins University data.
However, expectations of a plunge in oil stockpiles at the world’s largest economy helped to support oil prices in the near term.
READ: Nigeria surpasses 100,000 cases of Covid-19
What you should know: As at press time, Brent crude futures traded at $55.59 a barrel and West Texas Intermediate futures was around $52.22 a barrel. Both major oil benchmarks remained firmly above the $50 mark.
A worldwide scramble to procure and roll out COVID-19 vaccines strengthens with some nations extending or re-instating COVID-19 lockdown measures to curb the spread of the virus.
READ: Gold prices up on U.S Central Bank’s will to keep interest rates low
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, analyzed the prevailing price action in the crude oil market, including the Saudis’ will in supporting oil prices.
“COVID-19 resurgence, a stronger dollar, fed policy uncertainty, and political angst are all combining into a near term toxic elixir for oil markets as traders are unwilling to fire higher this week so far. This is happening, despite the structural catalysts of vaccine distribution and activity normalization remaining well intact.
READ: World Bank’s global outlook amid COVID-19 surge
“Still, the modest pullback in price is very unsurprising after such a strong first week of the year, reacting to the surprise unilateral cut in Saudi production and the prospect of increased economic stimulus in the US as the Democrats won control of the Senate.”
What to expect: Oil traders are obviously aware that there are near-term speed bumps, though not necessarily great reasons to go short on oil at this stage.
