During Monday’s early Asian trading hours, the WTI Crude Oil prices extended their previous week-long bullish rally, hitting the intra-day high above the mid-$ 62.00 level, mainly due to the hopes of faster economic recovery, triggered by the optimism over the vast US stimulus package. Meanwhile, the optimism over the potential vaccine/treatment for the highly infectious coronavirus also played a significant role in supporting the oil prices. Apart from this, the reason for the bullish oil prices could also be related to the on-going geopolitical tensions surrounding Iran.

Furthermore, the crude oil prices got an additional lift after the S&P 500 Futures climbed nearly 1.0% on the day, which continued to support the higher-yielding crude oil prices. In the meantime, the crude oil prices got some additional support from the weaker US dollar, as the oil price is negatively related to the US dollar. On the bearish side, New Zealand’s fresh lockdowns, along with fears of inflation and a 9-month low in terms of China’s NBS Manufacturing PMI, keep questioning the upside momentum in crude oil. The WTI is currently trading at 62.55, and consolidating in the range between 61.89 and 62.92. Traders seem cautious to place any strong positions ahead of this week’s meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC plus).

The market trading sentiment succeeded in regaining its positive bias of the previous week, remaining supported on the day, as the upbeat Asia-Pacific stocks and the gains of the US stocks futures tend to highlight the risk-on mood. However, this could also be attributed to the recent headlines suggesting that the US and the UK are both nearing a substantial fiscal stimulus. US President Joe Biden’s $ 1.9 trillion COVID-19 relief package reached the Senate on Friday, while the UK Chancellor of the Exchequer, Rishi Sunak, is set to turn down the tax hikes and offer nearly 5 billion pounds in relief to business organizations in the UK.

Apart from this, the upbeat market sentiment could also be attributed to the latest news suggesting that the US Food and Drug Administration (FDA) has approved Johnson and Johnson’s one-shot coronavirus (COVID-19) vaccine, which in turn is likely to boost the global recovery from the pandemic. Thus, the upbeat tone surrounding the market trading sentiment is helping the higher-yielding crude oil prices to stay bid, on the back of the weaker US dollar.

As a result, the broad-based US dollar failed to gain any positive traction, remaining bearish at the start of the week, as the upbeat market mood weakened the safe-haven demand of the greenback. Therefore, the losses in the US dollar have become a critical factor that is keeping a lid on further losses in crude oil prices, as the price of oil is inversely related to the price of the US dollar. The US Dollar Index, which tracks the greenback against a bucket of other currencies, is trading at 90.817. In addition to this, the energy benchmark got an extra lift from the geopolitical tensions surrounding Iran. As per the latest report, Iran does not respect the European Union’s (EU) idea to re-negotiate the nuclear deal, which, as could be expected, met with disappointment from the United States. Meanwhile, due to age-old rivalry, Iraq has attacked several places in Syria, which are suspected to be backed by Iranian militia.

In contrast to this, the escalating chatter concerning the lockdowns in New Zealand, due to the coronavirus (COVID-19), coupled with a 9-month low of China’s NBS Manufacturing PMI, keep challenging the risk-on market mood, which could trim gains in the crude oil prices. Looking forward, market traders will keep their eyes on month-start PMIs, which will give commodities immediate direction. Meanwhile, the usual risk catalysts and the movement of the US dollar will also be key to watch, along with the talk surrounding the stimulus packages from the US and the UK, which will not lose their importance. Good luck!