Oil Breaks Out Of The Recent Trading Range

Oil Video 21.07.20.

Finally, Oil Moves Above The Resistance At $41.50

WTI oil was glued to the $40 level for almost a month. Yesterday, encouraging vaccine news failed to provide additional support to oil. Today, the catalyst that is significant enough to get oil out of the range has arrived – EU leaders have successfully negotiated a 750 billion coronavirus recovery fund.

The upcoming money-printing has provided support to most asset classes, and oil has finally managed to get above the key resistance level at $41.50.

At this point, oil has good chances to continue its upside move. Traders are focused on vaccine hopes and monetary stimulus news and ignore current developments on the pandemic front.

In short, the current bullish trend is intact, supported by money-printing and hopes that the world will soon return to normal life.

Today, this optimism will be tested by the new API Crude Oil Stock Change report which will provide additional data on the strength of oil demand rebound.

EIA Believes That U.S. Petroleum Demand Will Remain Below 2019 Levels For The Upcoming Months

EIA has recently published an update on its forecast for U.S. liquid fuel demand. As per EIA, gasoline demand is set to increase together with the increase in employment. For 2021, EIA expects that gasoline consumption will total 9.1 million barrels per day (bpd), just 2% lower compared to 2019 levels.

Not surprisingly, jet fuel consumption is expected to take the biggest hit, down 31% in 2020 compared to 2019 levels. For 2021, jet fuel consumption is expected to remain 12% below its 2019 average.

In general, EIA forecast looks rather optimistic for the oil market as it envisions are gradual return to normal.

The key question at this point is whether the U.S. domestic oil production will increase due to higher oil prices. The upcoming EIA Weekly Petroleum Status report will not provide the market with an answer since oil has just rallied above the resistance at $41.50.

Traders will need to wait for several weeks to see whether higher oil prices will lead to higher U.S. domestic oil production, assuming oil stays above $41.50. In case production stays near current levels despite higher oil prices, traders will have one more reason to buy oil.

For a look at all of today’s economic events, check out our economic calendar.