WTI Crude Oil Exhibits Another Bullish Wave – OPEC Supply Cut Supports
Arslan Butt • 3 min read
During the Asian trading session today, WTI Crude Oil managed to extend its gaining streak of the previous session, hitting an intra-day high well above the mid-$ 61.00 level, mainly due to the optimism concerning the American COVID-19 aid package, which instantly bolstered hopes of a recovery in 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 the latest news suggesting that US President Joe Biden had said that the US would have enough COVID-19 vaccines for every US citizen end of May.
Furthermore, the upticks in the crude oil prices were further bolstered by the possibility that, at a critical meeting later in the day, OPEC+ producers might decide against increasing production. But the cases of the new variant of COVID-19 in New Zealand has urged the governments to re-impose further restrictive measures, such as lockdowns, which has become a critical factor that is keeping a lid on any additional gains in the crude oil prices. Meanwhile, the fresh strength of the broad-based US dollar was also seen as one of the critical factors that capped the upside momentum in crude oil, as the price of oil is inversely related to the price of the US dollar.
At the moment, WTI Crude Oil is trading at 61.45, and consolidating in the range between 60.69 and 61.60. The market trading sentiment failed to maintain its positive performance of the previous day, turning sour, even after the US Congress got closer to supporting President Joe Biden’s optimistic COVID-19 relief package. Meanwhile, the heavy push by the UK government, aimed at speedy recovery via the annual budget, also failed to give any meaningful support to the market trading sentiment. Thus, the UK budget and US stimulus progress regarding vaccine expectations, are helping the higher-yielding crude oil prices to stay bid. It should be noted that US President Joe Biden and Australian Prime Minister Scott Morrison remain confident, due to the latest vaccine deliveries.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, referred to together as OPEC+, are thinking of stepping back from their plan to increase production, because a recovery in oil demand remains uncertain due to the coronavirus crisis. The market had anticipated that OPEC+ would ease production cuts by around 500,000 barrels per day (BPD) from April, which was seen as one of the key factors that underpinned the crude oil prices.
Meanwhile, crude got an additional lift after US gasoline stocks dropped last week, by the biggest margin in its history of reporting, while refining output fell to a record low, as a consequence of the deep freeze in Texas that shut down production. Gasoline inventories dropped too, declining to 243.5 million barrels. Furthermore, distillate stockpiles also fell by the biggest margin since 2003, to 143 million barrels.
On the USD front, the broad-based US dollar managed to extend its winning streak of the previous session. It took some further bids on the day, as disappointing US data and chatter surrounding the ability of the US to vaccinate all the adults in the country by May, favored the Treasury yields, which in turn boosted the dollar; it is worth mentioning that the benchmark 10-year Treasury yield grew to 1.4894% during the Asian session, with the dollar trading up against most currencies, as an atmosphere of calm continued to return to the market, boosting the investor perspective. As of now, traders seem cautious to place any strong positions, ahead of US Federal Reserve Chairman Jerome Powell’s speech, which is due later in the day.
However, 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. By 9:19 PM ET (2:19 AM GMT), the US Dollar Index, which tracks the greenback against a bucket of other currencies, rose by 0.03%, to 91.032.
Moving ahead, the market traders will keep their eyes on US Federal Reserve Chairman Jerome Powell’s speech, which is due later today. In the meantime, the upcoming OPEC+ meeting will also be closely observed. Across the pond, the chatter surrounding the stimulus packages in the US and the UK will not lose their importance. Good luck!
About the author
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.