Crude Oil Extends Bullish Trend Over $65 – Dip in Oil Stocks in Play! - Forex News by FX Leaders

Crude Oil Extends Bullish Trend Over $65 – Dip in Oil Stocks in Play!

Posted Tuesday, March 9, 2021 by
Arslan Butt • 3 min read

During Tuesday’s Asian trading session, WTI crude oil managed to extend its previous session’s gaining streak and remained well bid around above mid-$65.00 level mainly due to the optimism concerning the U.S. Covid aid package, which directly bolstered fuel demand recovery hopes. The U.S. Covid aid package’s expectations were triggered after U.S. Senate approval of a $1.9 trillion stimulus bill.

Apart from this, the bullish bias around the crude oil prices could also be attributed to the expected drawdown in crude oil inventories in the United States. Moreover, the upbeat market mood has played a significant role in supporting the higher-yielding crude oil’s prices. Alternatively, the broad-based U.S. dollar strength was also seen as one of the key factors that cap the upside momentum for crude oil as the oil price is inversely related to the price of the U.S. dollar. Not only the U.S. dollar’s strength but also a light calendar and Sino-American tussle also weighed on oil prices. WTI oil is currently trading at 65.52 and consolidating in the range between 64.67 and 65.69.

The market trading sentiment managed to maintain its previous day’s positive performance. It remained supportive on the day even after the U.S. House Speaker Nancy Pelosi told that the much-awaited U.S. fiscal stimulus worth $1.9 trillion will be out by Wednesday, versus widely expected Tuesday. Even so, the hopes regarding global economic recovery and a light calendar keep S&P 500 Futures up over 0.20. As a result, the U.S. Treasury yields remain bullish, which helped the dollar rise to a fresh high not seen since November 24, 2020.

At the USD front, the broad-based U.S. dollar managed to extend its previous-session winning streak and took some further bids on the day as bond yields got a boost and the U.S. economic recovery from COVID-19 is expected to come faster than expected, which puts the U.S. currency at an advantage. Moving on, the yields could rise further, ahead of a $120 billion auction of 3, 10, and 30-year Treasuries later in the week. It is worth recalling that the previous week marked a soft auction, particularly for seven-year notes, that drove yields up. As we know, the rising U.S. bond yields tend to underpin the U.S. dollar, but behind them is the realization that U.S. vaccination programs are progressing very fast, and the U.S. economic normalization may happen earlier than expected. However, the gains in the U.S. dollar were seen as one of the key factors that kept the lid on any additional gains in the crude oil prices as the price of oil is inversely related to the price of the U.S. dollar. The U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.03% to 92.308 by 10:56 PM ET (3:56 AM GMT).

Besides this, the bullish bias around the crude oil prices could also be attributed to the reports suggesting that the U.S. crude and refined product stockpiles likely dropped last week, with distillate inventories seen drawing down for the fifth straight week.

The Organization of the Petroleum Exporting Countries and allies’ (OPEC+) decision to keep production limits unchanged keeps helping the crude oil prices to surge more than 30% in 2021. In addition to this, the fuel demand is recovering day by day as countries gradually recover from COVID-19. Moving ahead, the market traders will keep their eyes on the U.S. crude oil supply data from the American Petroleum Institute, which is due later in the day. Besides this, the chatters surrounding U.S. and U.K. stimulus will not lose their importance. Good luck!

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