FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
95,484,666Confirmed
2,039,695Deaths
68,189,961Recovered
Fetching Location Data…
Advertisement
Advertisement
James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished higher last week, helped by the possibility that OPEC and its allies could take action to stabilize or increase their production cuts, an unexpected plunge in U.S. stockpiles and an extremely weak U.S. Dollar.

Gains may have been limited by a steady rise in coronavirus infections and as the outcome of the U.S. presidential election remained unsettled as of Friday’s close.

Advertisement
Know where WTI Crude Oil is headed? Take advantage now with 

75% of retail CFD investors lose money

Last week, December WTI crude oil futures settled at $37.14, up $1.35 or +3.77% and January Brent crude oil finished at $39.45, up $1.99 or +5.04%.

Bullish Factors

US Crude Oil Stockpiles Fell Sharply

U.S. crude oil stockpiles fell sharply the previous week, as a storm cut production in the U.S. Gulf of Mexico, while gasoline stocks increased and distillate inventories fell, the Energy Information Administration said last Wednesday.

Crude inventories fell by 8 million barrels in the week to October 30, compared with analysts’ expectations for an increase of 890,000 barrels. Gasoline stocks rose by 1.5 million barrels, compared with analysts’ expectations in a Reuters poll for a 871,000-barrel drop. Distillate stockpiles, which include diesel and heating oil, fell by 1.6 million barrels, versus expectations for a 2.0 million-barrel draw, the EIA data showed.

Crude production fell 600,000 barrels per day to 10.5 million bpd last week, the EIA said. Stocks at the Cushing, Oklahoma delivery hub for U.S. crude futures rose by 936,000 barrels, the EIA said. Refinery crude runs rose by 164,000 bpd and refinery utilization rates rose by 0.7 percentage points, EIA data showed.

Political Uncertainty, Divided Congress Weigh on US Dollar

Investors were betting that Democrat Joe Biden would become the next president but Republicans would retain control of the Senate, which would make it difficult for the Democrats to pass the larger fiscal spending they have been pushing.

As of Friday’s close, vote counting and trends suggested the Republicans were poised to retain control of the U.S. Senate, while the Democrats would hold a slimmed majority in the House of Representatives.

This outcome would likely weigh on demand for U.S. gasoline and distillates since it would likely mean the House and the Senate would have to reach a compromise on fiscal stimulus.

The dollar weakened because a smaller-than-expected fiscal stimulus package likely means the Fed would have to provide more monetary aid. A weak dollar could drive up foreign demand for dollar-denominated U.S. oil, but this would be a stretch if rising COVID-19 cases in Europe drive down demand.

Advertisement

Bearish Factors

Big Worries Over Demand in Europe

Helping to drive the market lower were worries about demand destruction due to the rapidly rising number of COVID-19 cases around the world. On Thursday, the European Union’s executive commission lowered its economic forecast, adding that the economy would not rebound to pre-virus levels until 2023.

Additionally, European Central Bank (ECB) Vice-President Luis de Guindos said on Friday that Euro Zone growth will likely be negative in the fourth quarter, as countries have imposed new restrictions to the economic activity over the past weeks in a bid to slow the coronavirus contagion.

The European Commission downgraded its GDP forecast expectations for 2020 and 2021 because of the second wave of infections.

Meanwhile, Italy recorded its highest daily number of infections on Thursday and cases surged by at least 120, 276 in the United States, the second consecutive daily record as the outbreak spreads across the country.

Weekly Forecast

The winner of the presidential election is no longer a guess. Biden won, but President Trump will try to tie up the results in court. Biden will take office in January.

With Biden’s win, the U.S. Dollar is expected to remain under pressure, not only because of fiscal stimulus, but because the Fed is expected to try to keep the economy moving forward while the politicians debate the size of the stimulus package. This could help offset some of the demand lost from the rapidly spreading coronavirus.

The most important factors driving the price action at this time are COVID-related restrictions and growing expectations that OPEC and its allies would postpone bringing back 2 million bpd of supply in January given demand has been sapped by new COVID-19 lockdowns.

The charts indicate the downside could be limited because of a major support zone and the upside could be limited because any bullish moves by OPEC+ will likely be offset by a COVID-related issue. This could lead to a rangebound trade over the near-term.

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

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US