Oil prices drifted lower at the last trading session of the week. Oil traders are currently going short after OPEC cut its demand forecast and the International Energy Agency said the market was still overloaded with energy supplies.
At the time of writing this report, Brent crude futures dropped 0.6% at $60.80 a barrel having dropped 0.50% on Thursday. West Texas Intermediate futures plunged by 0.6% at $57.88 a barrel, after falling by 0.8% on Thursday.
Both global oil benchmarks closed on Wednesday at their highest levels in more than 11 months after a nearly record-setting run of consecutive daily gains
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on prevailing fundamentals weighing on oil prices.
“After two downward corrections from Brent’s mid $61’s on two consecutive days, it suggests the markets got positioned a bit peaky especially after the IEA delivered a reality check and revised down its global oil demand forecast for 2021 and warned the market recovery is fragile.
“The oil market is a very sentiment-driven beast.
“There might be a growing sense that commentary and analysis got slightly too far over its skis as the price corrects upwards even though the data does not suggest a significant change in the near-term outlook. As such the IEA release provided the market with a vital sensibility check.”
Bottom Line; Energy experts anticipate it will be critical for OPEC+ to put political differences aside and remain focused on delivering the coordinated action that the market needs.
Oil prices drop as gasoline demand from U.S refineries remain poor
Oil prices suffered significant losses at the mid-week trading session in London.
Oil prices suffered significant losses at the mid-week trading session in London. Oil traders are virtually going short on macros revealing an unexpected build in U.S. crude inventories.
The surge in U.S oil inventories was attributable to the unprecedented cold snap that hit a key energy hub in the world’s largest economy during the previous week thereby pausing gasoline demand from refineries that were forced to close down.
At the time of writing this report, Brent crude was down 0.60% hovering around the $64 per barrel.
However, both major oil benchmarks remained above the $60 price levels.
The most recent data from the American Petroleum Institute revealed a surge of 1.026 million barrels for the week ending Febuary.19. Oil experts had earlier anticipated a 5.372-million-barrel drop.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on prevailing market conditions weighing on the black hydrocarbon
“With excessively stretched positioning and highly susceptible to any negative news, WTI dropped towards the $61 level after the API stockpiles jumped +1.026 million barrels versus the previous draw of 5.8 million barrels during the period ended on February 19.
“Although the commodity prices dropped following the bearish stockpile data, bulls probably won’t be charging back to the pen en masses as the smoldering embers around the Middle East powder keg threaten to ignite once again as the US-Iran conflict continues to simmer but at a higher heat level today.”
What to expect: Still, Oil pundits expect more visibility on oil traders move at the end of next week with the next round of monthly OPEC+ meetings. Outside of a rise in geopolitical risk, upside momentum could be limited in the coming days as oil traders wrestle with OPEC+ next move.
Gold maintains shine after advancing for two days
The bullion asset regained its lustre after a 2.2% drop recorded in the past week,
Gold stayed on course at the second trading session of the week after advancing for two days, as metal traders awaited testimony from U.S Fed Chief, Jerome Powell.
At the time of drafting this report, the bullion asset traded at $1,807.24 an ounce after rising 1.9% over two days.
The U.S Fed Chief’s semi-annual report at the U.S congress today and the next day will be monitored by metal traders for further policy guidance, and his assessment of the economic recovery at the world’s largest economy.
The bullion asset regained its lustre after a 2.2% drop recorded in the past week, as traders refocus on rising inflation expectations.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave valuable insights on how the precious metal managed to stay above the $ 1,800-ounce price level.
“It was a strange world seeing the commodity locomotive racing at full steam, but gold left-back at the station. But correlations are looking more normal today after yesterday morning signal gold was trading slightly higher in delayed response to USD weakness. A weaker US dollar remains one of the primary lift-off balloons.
Gold built on Friday’s modest rally, clearing and holding above the USD1,800/oz level. USD weakness was likely the key factor behind gold’s recovery.”
What to expect: The U.S congress may vote on the US$1.9 trillion stimulus package in the coming days, which should hold gold’s appeal as inflation concerns and reflation appeal suggest gold is a good hedge.
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