Oil prices dipped lower at the fourth trading session of the week, as traders are now weighing the ever-rising number of COVID-19 cases and the impact on global energy demand against a fifth consecutive week of declines in US oil production.
The number of global COVID-19 cases surpassed 90.87 million as of Jan. 12, according to Johns Hopkins University data.
What you should know
- At press time, Brent oil futures slumped by 0.16% to $55.97 and West Texas Intermediate futures edged lower by 0.15% to $52.83. Both major oil benchmarks however remained above the $50 mark.
- The oil market’s recent bullish rally took a halt as the stronger dollar and the ever-present gasoline supply overhang offset the drying up of U.S. crude inventories.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on OPEC+ intentions coupled with the world’s largest economy crude oil stockpiles’ macro:
“Oil market sizzling rally likely took a hiatus as the stronger dollar and the omnipresent gasoline supply overhang offset the evaporating US crude inventories capping both primary benchmarks under key psychological and technical inflexion points.
“Even before the not so rosy gasoline read on the US Department of Energy (DOE) report, this gnawing temporal disconnect was weighing on market sentiment with spot miraculously trading better now than they were before the pandemic.”
What to expect
- Oil is still pricing in a great deal of optimism linked to the roll-out of Covid-19 vaccines, but any negative development would prompt a sharp negative reaction.
- Still, demand will gradually improve as more folks get vaccinated, and the supply side is under control thanks to OPEC+ and Saudi Arabia’s continued efforts.