Oil Tries To Settle Below The $52 Level As Traders Take Some Profits Off The TableOil failed to settle above the $54 level and gained strong downside momentum.
Oil Video 15.01.21.
Oil Moves Lower As Traders Take Profits After Rally
Yesterday, U.S. President-elect Joe Biden unveiled his stimulus proposal worth $1.9 trillion, and it looks like traders took this announcement as a signal to take some profits after the recent rally.
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Today, riskier assets are under pressure in what can be seen as a classic “sell the news” move. Oil is losing ground together with other riskier assets and is currently trying to settle below the $52 level.
The near-term fundamental outlook for oil remains challenging as European countries are set to keep their lockdown measures for the upcoming weeks. Meanwhile, the start of mass vaccination programs was not as robust as expected.
At the same time, the recent rally was caused by general optimism and Saudi Arabia’s decision to cut oil production by 1 million barrels per day (bpd) in February and March, and these factors may still be in play in the near term.
It should be noted that WTI oil managed to get from the $34 level at the beginning of November to the recent highs at $53.90 without any material pullback, so traders’ desire to take some profits near highs makes perfect sense.
OPEC Leaves Its 2021 Oil Demand Forecast Unchanged
OPEC has recently released its new Monthly Oil Market Report and left demand estimates unchanged. According to OPEC, world oil demand will increase from 90 million bpd in 2020 to 95.9 million bpd in 2021.
Interestingly, the negative developments in Europe did not lead to the revision of OPEC’s forecast. Perhaps, OPEC’s analysts decided that the previous forecast was conservative enough and took current downside risks into account.
Meanwhile, Italy has just extended current virus containment measures amid risks of a third wave of the virus. Other European countries will likely announce similar measures in the upcoming weeks, putting more pressure on demand for oil.
According to the recent Bloomberg analysis, transportation fuel demand in Europe is at its lowest point since the end of the first lockdowns. If market’s attention shifts from vaccine optimism to current challenges on the demand side, oil will move lower.
For a look at all of today’s economic events, check out our economic calendar.