Crude Oil Bullish Bias Continues Amid API Figures – Eyes on EIA Figures!

During Wednesday’s Asian trading session, WTI Crude Oil extended its overnight winning streak and gained more traction, as the new US coronavirus fiscal aid package and a decline in crude oil inventories boosted the recovery in the fuel demand and gave the oil prices a fairly good lift. Furthermore, the sentiment surrounding the oil prices is also benefiting from the weaker US dollar, as the oil price is inversely related to the price of the US dollar.

The greenback dropped to its lowest level in more than two years, as the market players looked past a new delay in US stimulus cheques, which boosted hopes that additional financial aid was still possible. The black gold prices were also buoyed by the COVID-19 vaccination program, which is currently underway and set to continue in 2021. On the bearish side, the immediate concerns over the new B117 strain of COVID-19 could cap crude oil prices. Meanwhile, the gains in crude could also be restricted by the renewed restrictions on economic activity. Aside from this, concerns that OPEC will ease the current production cuts from February is also challenging the any  upside momentum in oil. WTI Crude Oil is currently trading at 48.25, and consolidating in the range between 48.03 and 48.34.

As already mentioned, the crude oil prices recently climbed to $ 48.36, from $ 48.03, as the American Petroleum Institute (API) released the Weekly Crude Oil Stock figures for the week ending on December 25. The report showed a draw of 4.785 million barrels for that week, versus the previous addition of 2.7 million barrels.

However, the market trading sentiment succeeded in extending its five-day winning streak, remaining supportive on the day, as the positive appearance of Asia-Pacific stocks and gains in the US stocks futures tend to highlight the risk-on mood. The S&P 500 Futures rose to 3,735, which was up by 0.15%. The reason for this could be associated with the fresh report suggesting that the US government will release the coronavirus (COVID-19) aid payments soon, as US Treasury Secretary Steve Mnuchin has anounced that the $ 600 payments, which are part of the already agreed US coronavirus (COVID-19) stimulus package, will be out tonight.

Furthermore, the sentiment on the equity markets was also benefited by the Cable TV update suggesting that the Dragon Nation showed a willingness to return two Hong Kong activists to the authorities after detaining them a few days back. Thus, the upbeat market sentiment is playing a major role in underpinning the higher-yielding crude oil prices.

As a result of the risk-on mood, the broad-based US dollar failed to put a stop its bearish moves of the past weeks, remaining bearish on the day. It is worth recalling that the US dollar index (DXY) registered the heaviest losses in approximately two weeks yesterday, after the American House of Representatives backed the $ 2,000 COVID-19 stimulus paycheck signed by US President Trump. Apart from this, the losses in the US dollar were further bolstered after the United States registered the first case of the coronavirus mutation, which instantly raised doubts over economic recovery in the US and undermined the greenback. Therefore, the losses in the US dollar have become a key factor that is keeping the oil prices higher, as the price of oil is inversely related to the price of the USD.

Moreover, the vaccination programs around the world will continue next year, allowing countries to relax restrictions on movement and business activities. This, in turn, has boosted hopes of a recovery in the fuel demand and contributed to the gains in crude oil prices.

On the contrary, the intensifying fears over the B117 strain of COVID-19 keep fueling the doubts over the global economic recovery, which was seen as one of the key factors that has kept a lid on any additional gains in the crude oil prices. It is worth recalling that the new B117 strain of the COVID-19 virus, which was initially seen in southeastern England in September, is spreading. As per the latest report, the US has reported its first case in Colorado, which could lead to the strictest Tier 4 restrictions soon.

Aside from this, the gains in the crude oil prices were also capped by the reports suggesting that, at its meeting which is due next week, the Organization of the Petroleum Exporting Countries and allies, or OPEC+, will discuss easing the current production cuts from February onwards. Meanwhile, Russia is also supporting an increase of 500,000 barrels per day.

Looking forward, the market traders will keep their eyes on official inventory data from the US Energy Information Administration (EIA). Apart from this, the updates concerning the vote on the US coronavirus aid paychecks in the Senate and the latest virus news could offer immediate direction in terms of crude oil prices. Good luck!