WTI Crude Oil Choppy Session Continues – An Intraday Outlook!

Apart from this, the global equity market was further supported by the renewed possibilities of the next stimulus package. After US President Donald Trump’s surprise signing of the much-awaited stimulus bill, the House members supported the $ 2,000 paycheck demand, but turned down the veto over the defense bill. The bill is now en-route to the Senate, where Republicans are expected to create problems for the smooth passage, by citing budget deficit issues. Elsewhere, the US equity market got an additional boost after the post-Brexit trade deal was reached between the European Union (EU) and the UK last week. Thus, the progress on the latest US stimulus measures and optimism over the Brexit deal have boosted the market risk sentiment, and this has played a major role in underpinning the higher-yielding crude oil prices.

As a result, the broad-based US dollar failed to gain any bullish traction, remaining bearish on the day, as doubts persisted over the recovery of the US economy from the COVID-19 pandemic. Besides this, the risk-on market sentiment, backed by optimism over potential vaccines for the highly contagious coronavirus, also played a major role in undermining the safe-haven US dollar. In this way, the losses in the greenback have become the key factor that has kept the oil prices higher, as the oil price is inversely related to the price of the US dollar.

On the bearish side, the gains in the crude oil prices were capped by the intensifying fears of rising numbers of COVID-19 cases in the US, Europe and some of the notable Asian nations, which have continually fueled fears of renewed lockdowns in several countries. In addition to this, the Organization of the Petroleum Exporting Countries and Allies, known as OPEC+, is considering easing the production cuts that are currently in place by 500,000 barrels per day in January. Meanwhile, Russian deputy prime minister Alexander Novak also announced that his country would still support an increase in production from Feb 1 if conditions get back to normal.

In the absence of any major data/events on the day, the market traders will keep their eyes on the crude oil supply data from the American Petroleum Institute, which is due to be released later in the day. In addition to this, the updates concerning the US stimulus package will be key to watch, as many hurdles in the way of the US stimulus could sour the market sentiment on the day. In the meantime, the risk catalysts, like geopolitics and the virus woes will not lose their importance. Good luck!