WTI Crude Oil Extend Friday Gains and Remains Bullish – A Fundamental Outlook!
Arslan Butt • 3 min read
Today, in the early Asian trading session, WTI Crude Oil managed to continue its gains of Friday, remaining bullish at around the $ 41.00 level, as the Dragon Nation has played a significant role in underpinning the recovery of the global oil demand in recent months, by importing the highest volumes of crude oil ever, since May. Besides this, the prevalent bullish sentiment surrounding the crude oil prices could also be attributed to the upbeat American Petroleum Institute (API) data released on Thursday, which showed a larger-than-expected draw in US crude oil.
This, in turn, underpinned the crude oil prices. Apart from this, the bullish tone of the crude oil prices also drew support from the news suggesting that the Organization of the Petroleum Exporting Countries (OPEC) members were in full agreement regarding their pledge, in September, to curb output.
The strength of the broad-based US dollar, backed by the risk-off market mood, became the key factor that kept a lid on any additional gains in the crude oil prices. Furthermore, the gains in oil were also capped by the latest reports that the US drillers added 12 new oil rigs in the week of October 16, increasing the total oil rig count to 205. This has been the largest increment since January. Moreover, the intensifying fears that the US will not release a new stimulus package until after the presidential election and the worsening coronavirus (COVID-19) situation in Europe could also be considered key factors that are capping any further upside momentum in crude oil. WTI Crude Oil is trading at 41.12, and consolidating in the range between 41.12 and 41.12.
It is worth recalling that, on Thursday, the American Petroleum Institute (API) reported a 5,422 million-barrel draw in the WTI Crude Oil supply for the week ending October 9. However, the latest draw is much larger than both the projected 2.3 million-barrel draw and the 951,000-barrel build reported during the previous week. This, in turn, boosted the sentiment surrounding the crude oil prices.
Elsewhere, the crude oil prices received support from reports suggesting that the Organization of the Petroleum Exporting Countries (OPEC) members were in full agreement regarding their output curbs, as promised in September. Across the pond, the reason for the crude oil gains could also be associated with the latest reports suggesting that the Dragon Nation has played a key role in supporting the recovery in the global oil demand in recent months, by importing the highest volumes of crude oil on record, since May.
Customs import data from the world’s biggest importer of crude oil continues to show strong shipments of crude, as ports and customs continue to process cargoes that have waited to be discharged for weeks. Details suggest that China’s crude oil imports haven’t dropped below 11 million barrels per day (BPD) over the past five months, with the figures for June coming in at 12.9 million BPD, breaking the previous record in May by more than 1.5 million BPD. However, the Dragon Nation’s recovery from the coronavirus outbreak could be considered one of the key factors that supported the recovery in global demand in early summer.
American drillers also added 12 new oil rigs in the week of October 16, bringing the total oil rig count to 205, which accounts for the largest increment since January, as per the latest report by Baker Hughes. However, the number of oil and gas rigs in the US has risen for the 5th consecutive week, which tends to keep the oil prices under pressure.
On the Bearish side, the market trading sentiment was under pressure, due to fears that the latest stimulus package in the US would not be released until after the presidential election. Moreover, prevalent losses in the S&P 500 Futures’ were further bolstered by the intensifying numbers of coronavirus (COVID-19) cases in Europe, coupled with pauses in the (COVID-19) virus vaccine trials, which in turn, became the key factors that capped any further upside momentum for the crude oil prices.
On the USD front, the broad-based US dollar managed to keep its modest gains throughout the previous week, as the traders were still cheering the risk-off marker mood. However, the gains for the greenback seem rather unaffected by the intensifying political uncertainty, ahead of the upcoming US presidential election on November 3. Thus, the gains in the US dollar became the key factor that kept a lid on any additional gains in the crude oil prices, as the price of oil is inversely related to the price of the US dollar.
Looking forward, traders will keep their focus on Fed Chair Powell’s speech. In the meantime, the NAHB Housing Market Index data will also be key to watch. Apart from this, the ongoing drama surrounding US-China relations and updates about the US stimulus package will not lose any significance. Good luck!