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Oil Price Fundamental Daily Forecast – Crude Gives Up Early Gains, but Brent Holds Psychological $60 Level

By:
James Hyerczyk
Published: Feb 9, 2021, 12:34 UTC

The early weakness comes as no surprise to some, especially to those traders watching technical overbought/oversold indicators and oscillators.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed after giving up earlier gains. The sudden price reversal came about after the nearby futures contract reached its highest level since January 2020. The move was likely fueled by profit-taking. Despite the setback, Brent is still holding above the psychological $60.00 level. A break below this price could trigger sell stops, which would extend losses.

At 12:13 GMT, March WTI crude oil futures are trading $57.94, down $0.03 or -0.05% and April Brent crude oil is at $60.62, up $0.06 or +0.10%.

Supply Being Squeezed by Saudis

According to Reuters, top exporter Saudi Arabia is squeezing supply in February and March on top of cuts by producers in the Organization of the Petroleum Exporting Countries and their allies, prompting forecasts of a supply deficit this year.

Libyan Oil Production Dips

Libyan oil production has fallen to 1.04 million barrels per day (bpd) from 1.3 million bpd late last year due to an ongoing strike by the Petroleum Facilities Guards, a Libyan oil source said on Monday.

Demand Hopes Pinned on Effectiveness of Vaccines; Weak Dollar Supportive

Investors are pinning hopes on an oil demand recovery when COVID-19 vaccines take effect. In addition to the vaccine hopes, a weak dollar is helping to shore up foreign demand for the dollar-denominated commodity. On Tuesday, the greenback is down about 0.4% against a basket of currencies, making dollar-priced crude a more attractive buy to holders of other currencies.

Daily Forecast

The early weakness comes as no surprise to some, especially to those traders watching technical overbought/oversold indicators and oscillators. In fact, a correction may be necessary at current price levels to alleviate some of the upside pressure. Additionally, some sellers may feel the market is a little ahead of the fundamentals, after all, we haven’t seen any improvement in the demand picture yet.

“We attribute the latest price surge first and foremost to financial market factors such as the considerable investor optimism and the again weaker U.S. dollar, and expect prices to correct,” Commerzbank analysts said in a note.

Meanwhile, investors are looking ahead to the American Petroleum Institute’s (API) weekly storage report due later today at 21:30 GMT.

U.S. crude and gasoline stockpiles probably rose last week, while distillate stocks were seen down, a preliminary Reuters poll showed on Monday.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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