Crude Oil Extends Bullish Bias – US Stimulus Hopes Weaken Dollar! - Forex News by FX Leaders

Crude Oil Extends Bullish Bias – US Stimulus Hopes Weaken Dollar!

Posted Monday, February 8, 2021 by
Arslan Butt • 3 min read

During the Asian trading session today, WTI Crude Oil managed to extend its gaining streak of the previous week, hitting an intra-day high well above the mid-$ 57.00 level, mainly due to the upbeat market mood, triggered by the hopes that US President Joe Biden’s $ 1.9 trillion COVID-19 relief package will be passed, which instantly bolstered hopes of a recovery in the fuel demand and contributed to the gains in crude oil. Apart from this, the bullish bias surrounding the crude oil prices could also be attributed to Saudi Arabia’s commitment to implementing further supply cuts in February and March. Meanwhile, the reductions by other members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) also helped to maintain the balance in the global markets.

The crude oil prices got some additional support after tensions escalated between the US and Iran. Conversely, the re-emergence of COVID-19 cases has urged many nations to re-impose further restrictive measures, such as lockdowns, which has become a key factor that has kept a lid on any additional gains in the crude oil prices. Meanwhile, the fresh strength of the broad-based US dollar is also capping the upside momentum in crude oil, as the oil price is inversely related to the price of the US dollar. Besides this, the upticks in the crude oil prices were also capped by the downbeat reports suggesting that the coronavirus vaccines from Oxford-AstraZeneca failed to tame the South African variant of the virus. WTI Crude Oil is currently trading at 57.41 and consolidating in the range between 57.02 and 57.56.

The market trading sentiment maintained its positive performance of the previous week, remaining supportive on the day, amid optimism regarding an additional US financial aid package. These hopes were boosted after a weak US jobs report, which showed fewer jobs had been generated in the economy than expected. Non-farm payrolls were at 49,000, and the unemployment rate was at 6.3%. The disappointing data could lead to more stimulus measures, which in turn could boost the fuel demand. As per the latest report, the debate in congress continues regarding the $ 1.9 trillion stimulus package proposed by US President Joe Biden in January. Treasury Secretary Janet Yellen also said at the weekend that the US could return to full employment in 2022 if the country delivers a strong enough relief package.

Besides this, another reason behind the positive performance of the market could also be attributed to Japan’s better-than-expected Current Account and Trade Balance data. Meanwhile, the optimism over the rollout of vaccines for the highly contagious coronavirus is also playing a major role in supporting the market trading sentiment. This was seen as one of the key factors that underpinned the crude oil prices.

Another major contributing factor to the bullish bias surrounding the crude oil prices could also be attributed to Saudi Arabia’s promise to implement more supply cuts in February and March; meanwhile, the reductions in supply by other members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), also helped the oil market to maintain its bullish bias.

Meanwhile, the crude oil prices got an additional lift after Iran asked the US to lift sanctions. As per the latest report, Iran’s Supreme Leader Ayatollah Ali Khamenei said that Tehran’s “final and irreversible” decision was only to return to compliance with the 2015 nuclear deal if Washington lifts sanctions against the Islamic Republic. These remarks came after US President Joe Biden stated that the United States would not lift sanctions merely to get Iran back to the negotiating table. It appeares that both sides are posturing as they weigh up whether or not the pact can be revived, and how.

Despite the upbeat mood and weak US data, the broad-based US dollar managed to stop its declining streak of the previous-session, taking some fresh bids on the day, as disappointing US jobs data caused some traders to scale back bets on a rebound in the greenback. The US will also present its federal budget later in the week and some important US data, including the consumer price index, will also be released this week. The gains in the US dollar were seen as one of the key factors 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. Meanwhile, by 8:53 PM ET (1:53 AM GMT), the US Dollar Index, which that tracks the greenback against a bucket of other currencies, had risen by 0.13%, to 91.088.

Moving ahead, market traders will keep their eyes on the news relating to the US aid package, coronavirus (COVID-19) vaccines and the US-Iran tensions. On the data front, the German Industrial Production m/m and the Sentix Investor Confidence, will be key to watch. Good luck!

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