Oil Bulls Battle Rages on Amid Growing Uncertainty

The parabolic affecting the most liquid derivatives market seems to be changing as the stronger US dollar and higher US interest rates are also capping oil gains, coupled with reports of a third Covid-19 wave likely to extend lockdowns in key emerged markets and delay the normalization of crude oil’s demand/supply rebalancing.

Historical price patterns reveal during lockdown periods oil prices usually cool off, leading oil traders to ponder about a lagged rise in Covid-19 cases at the world’s largest economy might Europe’s footsteps due to a surge in social mobility.

Such macro hints oil traders could face more pain in the coming weeks.

Consequently, oil traders are wary of the world’s largest economy shuffling back into the Covid-19 lockdown abyss, dampening earlier reports that revealed the U.S economy could likely grow by 6.5% in 2021 might result in a seismic effect on oil prices in the long term.

Still, it won’t be a smart move discounting Oil bulls at least in the short/medium-term, because underlying demand for the black viscous hydrocarbon has improved relatively well, though that could come under check if Brent crude prices breaks below the all-important $60 a barrel price support level.

Finally, Oil traders are also thinking of next week’s OPEC meeting outcome for more guidance, not forgetting OPEC’s de facto leader Saudi Arabia had earlier reminded its allies on being extremely careful as regards raising output levels, warning OPEC+ that any degree of complacency could cause havoc on oil prices.