- WTI is consolidating just above the $48.00 mark as the market mood remains positive.
- Crude oil markets continue to weigh the themes that will impact short- and medium-term demand.
Front-month WTI crude oil futures are consolidating just to the north of the $48.00 level, having failed in an earlier attempt to push above the $49.00 level. At present, WTI trades flat on the day, but remains supported amid a positive feel to broader market trade; all major US equity indices hit record highs on Monday, boosted by US President Donald Trump’s signing of the $900B Covid-19 aid package that has lead Goldman Sachs to increase its forecast for Q1 2021 US GDP growth to an annualised pace of 5% from 3% previously.
Crude oil markets balance opposing themes…
Crude oil market focus has predominantly been on demand-side fundamentals, for the most part, this month; news has been mixed on that front since the weekend, with US President Donald Trump signing the $900B Covid-19 aid package into law over the weekend, which will give US demand a boost, but the Covid-19 situation clearly getting worse on both sides of the Atlantic. The prospect of tougher lockdowns to curtail sharply rising infection rates looms, but the rug has not been pulled from under crude oil markets feet given the ongoing and so far successful start to mass Covid-19 immunisations across the UK (nearly 700K), US (nearly 2M) and now beginning in the EU too. China has also reportedly vaccinated one million.
While traders juggle the short- and medium-term outlook for crude oil demand, they must also consider the impact that the incoming, modest increase in OPEC+ output will have on prices. As a reminder, OPEC+ output cuts of 7.7M barrels per day will be eased by 500K in January and Russia reportedly supports another increase of the same amount in Februay. Ahead, focus will remain on individual member state compliance to the pact, as well as the prospect for a surge in Iranian exports should the Biden administration come to some sort of understanding with the Iranians over their nuclear programme.
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