Crude Oil Extends its Overnight Winning Streak – All Eyes on EIA Data! - Forex News by FX Leaders

Crude Oil Extends its Overnight Winning Streak – All Eyes on EIA Data!

Posted Wednesday, January 27, 2021 by
Arslan Butt • 3 min read

During Wednesday’s Asian trading hours,  WTI Crude Oil extended its winning streak, edging higher, over the mid-$ 52 level. The bullish trend surrounding the crude oil prices was supported by the surprise draw in US crude oil supplies and a decline in the number of COVID-19 cases in China, which raised hopes for increased fuel demand and contributed to the gains in crude. Moreover, the crude oil prices got an additional lift after positive remarks by US President Joe Biden and global vaccine manufacturers, regarding a cure for the virus.

Meanwhile, the positive forecast about global growth by the International Monetary Fund (IMF) also improved global economic optimism, which gave some additional support to the crude oil prices. On the bearish side, the heightened concerns about the increase in COVID-19 cases and the economically painful hard lockdowns throughout the world have become key factors that could cap the bullish momentum for crude oil. In the meantime, the long-lasting Sino-US tussle, and the doubts over Biden’s $ 1.9 trillion fiscal stimulus and ex-US President Donald Trump’s impeachment, are also challenging any upside momentum in crude oil. WTI Crude Oil is currently trading at 52.87, and consolidating in the range between 52.66 and 52.88.

On the data front, the crude oil supply data from the American Petroleum Institute (API) showed a draw of 5.272 million barrels for the week ending Jan. 22, against the forecasts of a 603,000-barrel build and the 2.562-million-barrel build of the previous week. The upbeat prediction from the International Monetary Fund (IMF) has also improved the economic optimism and favors the crude oil prices. It is worth mentioning that the IMF updated its forecast for global economic growth in 2021 to 5.5%, from the previous figure of 5.2%, in the October publication, although the Washington-based company did cite ‘exceptional uncertainty’ about the economic outlook, highlighting the renewed waves of infections and the new variants of COVID-19.

Apart from this, the announcement by the Biden Administration of further vaccines, and the confidence of the vaccine producers, that they can tame the COVID variants, has pleased the crude oil buyers. Despite the optimism over a possible coronavirus vaccine, the S&P 500 Futures failed to extend its positive performance of the previous night, turning sour ahead of the European session on the day. However, this could be attributed to the uncertainty over Biden’s $ 1.9 trillion fiscal stimulus plan and the drama surrounding ex-US President Donald Trump’s impeachment. Meanwhile, the mixed data concerning inflation and the market sentiment in Australia, as well as China’s Industrial Production, also put downside pressure on the market trading sentiment.

In turn, the broad-based US dollar succeeded in stopping its overnight losing streak, edging higher during the Asian session, as investors started to prefer the safe-haven assets in the wake of the risk-off market sentiment. However, the gains in the greenback seem rather unaffected by the cautious sentiment ahead of Federal Reserve Chair Jerome Powell’s speech. He is likely to renew his commitment to the ultra-easy policy. Thereby, the gains in the US dollar have become a key factor that is keeping 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.

In contrast to this, crude oil also received support from reports suggesting a decrease in the oil supply, as Iraq is up for reducing its output, as compensation for the breach of the OPEC quota.

Moving ahead, market traders will keep their eyes on the data from the US Energy Information Administration, which is due later in the day. Apart from this, the updates over US President Joe Biden’s fiscal stimulus plan and ex-President Donald Trump’s impeachment process will also be closely followed. Across the ocean, the updates surrounding the Sino-US tussle and the virus woes will not lose their significance. Good luck

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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