WTI pulls back beneath $47.00 level as risk appetite fades

• WTI has seen a pullback below the $47.00 from Thursday’s highs amid a souring of the market’s broad appetite for risk.
• Markets are concerned by the lack of progress in Brexit and US fiscal stimulus negotiations.

The front-month futures contract for the US benchmark for sweet light crude, West Texas Intermediary (or WTI) trades with mild gains on Friday, but has seen a pullback below the $47.00 handle following Thursday’s rally that took the crude oil contract as high as the $47.70s. At present, front-month WTI futures trade around 10 cents or 0.1% higher on the day close to $46.90.

Crude oil optimism subsides as sentiment slides

The mild pullback from highs being seen in crude oil markets echoes a broader deterioration of risk appetite being seen across equity (the Stoxx 600 and S&P 500 both trade with losses), bond (US and core European yields are lower) and FX markets (safe-haven JPY and USD are amongst the best G10 FX performers on Friday). Markets seem to be showing some concern about the lack of progress towards deal on both the UK’s future trading relationship with the EU and further Covid-19 fiscal aid in the US. Officials on both sides of the English Channel seem to now see no deal as the most-likely outcome, something which would hamper the European economic recovery. Meanwhile, a deal on another round of US fiscal stimulus still seems a long way off, according to a Politico reported citing sources. But crude oil markets continue to trade with decent gains on the week; as things stand, WTI is up just under 1.5%.

In terms of supply-side news, note that the OPEC+ Joint Ministerial Monitoring Committee will be meeting on the 17^th of December (next Thursday) and will review secondary data and current crude oil market conditions before making a policy recommendation to OPEC+, though this policy recommendation is highly unlikely to depart significantly from the decision of the cartel earlier on in the month to begin gradually tapering their current production cuts at the start of 2021, given not much has changed fundamentally speaking oil markets since the start of the month.