Oil Prices Vulnerable to Deeper Corrections amid Expansive Fiscal ApproachCrude oil prices are trading at an overbought position and susceptible to profit-taking after recent macros reveal the death toll from the COVID-19 onslaught had so far killed about half a million Americans and rendered millions of people jobless globally, leading many oil traders to paint a dark cloud picture on energy demand recovering to the pre-COVID-19 pandemic era.
That said, Oil bears haven’t been able to dent the bulls gain recorded in 2021, as the dollar remained relatively weakened across the market spectrum, thereby supporting commodity assets like crude oil.
Recent price action reveals oil bears taking control at the $56/barrel resistance level in the case of Brent crude, which reinforce the chances of continuing the decline for the rest of this week on the bias oil bulls seem to be out of gas and literally in exhaustion noting that breaking above the mentioned level will momentarily keep the bulls on course in breaching $60/barrel.
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Also, the recent drop in oil prices shows both major oil contracts are in the middle of their two-week ranges meaning they are vulnerable to deeper corrections if the COVID-19 caseloads get out of control.
In addition, oil bears have temporarily taken a grip on the oil market as most recent data show US crude stockpile bearishly rose 2.56 million against consensus draw coupled with macros hinting that the world’s largest importer on crude demand forecast looks high and susceptible to revision lower as lockdown spreads in China ahead of the Lunar New Yea.r
The leader of the free world, Joe Biden, recently pushed for a more expansive approach on the fiscal front, but the bears appear to be frightful on the bias that the U.S President faces a lingering battle with high ranking Republicans despite the fact the President’s party controls both chambers of Congress.