Range trading continued today in oil markets, with WTI content consolidating price gains near the highs of recent ranges. A neutral day for the US dollar saw buyers come back again, leading to a slight increase in prices overnight.
The rebound in WTI oil stopped near Wednesday’s high of $53.93. Bouncing up Thursday from $52.24, prices almost tested Wednesday’s high of $53.93 a couple of hours ago before pulling back slightly. Another deviation around $54.00 would indicate exhaustion of the uptrend and induce selling on the chart (or taking profit), leading to a pullback in price.
Against this backdrop, the door remains open for further gains in the near future with the next intermediate resistance at $54.45 (February 2020 high). However, a potential correction below should not be ruled out in light of current overbought conditions.
As Biden’s package is offset by weak US employment data, markets are not inclined to raise prices in one way or another. They will give North America the power to decide if retesting recent highs is warranted before the end of the week.
The steady rise in oil appears to be depleting gas reserves. Much of the rebound in oil prices has been fueled by inoculation optimism, bearish dollar rates that are spurring commodity growth across the board, and the Saudis leading the charge for depleting global oil reserves.
High-risk assets, including oil prices, also benefit from expectations that the Biden administration’s looming announcement of a stimulus package is just the beginning of the financial support he will provide.
Oil ignored the latest monthly OPEC report, which did not change either global supply or oil demand forecasts for 2021. Global oil demand is projected to rise by 5.9 million barrels per day to 95.9 million barrels per day. If the J&J COVID vaccine is approved and successfully implemented, it will help forecast raw material demand in the second half of the year.
Medium and long-term fundamentals for oil still look good, but if global COVID restrictions continue to rise, it should disrupt the oil price rally.
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