Oil Gains Ground On Stimulus OptimismOil managed to settle above the $53 level and made an attempt to get above multi-month highs at $53.90.
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The market believes that Joe Biden will not face significant resistance against the $1.9 trillion stimulus package, and that the direct support to consumers will boost oil demand in the near term.
Judging by the recent coronavirus data from the U.S., traders should not expect strong virus containment measures which may deliver another blow to the domestic oil demand.
While Joe Biden has many times stated that he planned to boost coronavirus response, his measures will likely be focused on increased healthcare funding rather than restrictions on mobility which is good for the oil market.
Oil traders have successfully ignored the constant flow of bad news from Europe which struggles to contain the second wave of the virus, and it looks like only a true catastrophe may attract their attention. The market remains in a bullish mood, and expectations of another round of stimulus may serve as the catalyst that will push WTI oil towards the $55 level.
Analysts Expect That Crude Inventories Will Continue To Decline
Currently, analysts expect that crude inventories will decrease by about 0.3 million barrels. The previous EIA Weekly Petroleum Status Report showed that crude inventories decreased by 3.2 million barrels and were about 8% above the five-year average for that time of the year.
Thus, the pace of crude inventory draw is expected to decrease. Inventories have been declining since early December so the continuation of this trend may provide psychological support to the market. At the same time, a sudden increase in crude inventories may hurt the market’s mood as oil remains near multi-month highs which increases its sensitivity to such news.
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