Oil Mixed Despite Positive Brexit NewsOil made an attempt to get above the resistance at $48.65 but failed to gain sufficient upside momentum.
Oil Video 24.12.20.
U.S. Gasoline Demand Increased To 8.02 Million Barrels Per Day
Yesterday, the Baker Hughes Rig Count report indicated that the number of U.S. rigs drilling for oil increased by 1 to 264. This week, the report was published on Wednesday rather than Friday due to Christmas holidays.
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The number of oil rigs continues to increase but the U.S. domestic oil production remains flat at 11 million barrels per day (bpd). The key question for the market is whether the recent increase in the number of oil rigs will ultimately lead to higher production levels. At this point, production remains at comfortable levels for the bulls, and crude oil inventories will continue to decline if demand picks up.
Interestingly, EIA data showed that gasoline demand increased from 7.98 million bpd to 8.02 million bpd. A year ago, gasoline demand stood at 9.3 million bpd so the gap is almost 1.3 million bpd.
If gasoline demand manages to settle above the 8 million bpd level and starts to rebound towards the 9 million bpd level, the oil market may get additional support. However, it remains to be seen whether such rebound is possible in winter at a time when the second wave of the virus remains strong.
Oil Avoids A Black Swan Event As UK And EU Reach A Brexit Deal
EU and UK negotiators have finally managed to reach a compromise trade deal after months of negotiations. A no-deal Brexit would have sent shockwaves across markets and put pressure on demand for oil in the near term as trade between UK and EU would have suffered.
Most markets show little reaction to the news, and it looks like the deal was mostly priced in. Only GBP/USD is under pressure from the “sell the news” trading action.
Negotiations between EU and UK were very challenging, and sometimes it seemed that the sides would fail to get a deal. While oil traders should not expect an immediate boost from Brexit news, the deal removes a major potential negative catalyst which is bullish for oil in the longer term.
Trading action will likely be calm today but oil will remain volatile next week as traders digest the news on Brexit, U.S. stimulus and the latest lockdowns around the world.
For a look at all of today’s economic events, check out our economic calendar.