While the gains seem little, the West Texas Intermediate (WTI) crude oil price is on a gradual rally from the strong bearish mode of the previous trading session. The gains are gradual because traders are not yet convinced that the crude oil price can shake off the effect of the COVID-19 pandemic and its adverse effect on oil demand.
As of this writing, WTI crude oil trades at about $71.20 per barrel. There were steep declines in crude oil prices yesterday following the economic report of China and the US manufacturing purchasing manager index (PMI) data. Hence, WTI oil declined by 4% in value in the last 24 hours, proving that oil demands might be unfulfilled as various factors reduce capacity operation.
Investors Concerned Over New COVID-19 Variant
Also, investors are concerned that the new strain of the COVID-19 could force authorities to suspend economic activities, which would dent oil demand. Despite the increasing number of available COVID-19 vaccines, pandemic-related effects are yet to slow down. Hence, investors are concerned that there might be more setbacks in the gradual economic recovery being experienced globally.
USOIL Chart. Source: TradingView
Even though geopolitical tensions in the Gulf region might escalate because an Israeli oil tanker was attacked around the coast of Oman, the attack doesn’t affect crude oil prices yet. The prices are even rising.
However, it is a proven fact that activities (positive or negative) in the middle east often affect the oil supply. Oil prices are often affected by supply pressures from the oil-rich region.
Also, the oil price has risen in response to the decline in US crude inventories of the past week. A Reuters survey reveals that the US crude stocks have declined by almost 3 million barrels in the last seven days – a decline that has been happening for three successive weeks now. Thus, traders have renewed hope of robust oil demand in the USA.
Experts from Commerzbank opined that the oil market continues to fluctuate based on the contrasting news about impending shortage in demand and tight supplies. A bullish scenario would be a price movement around the $70 range. If this bullishness is sustained, there would likely be a late rally around the $70-$72 levels.
Brent Markets Also Decline
There was also a decline in the Brent markets during today’s trading session; it declined to around the $71.90 range. From all indications, it is likely that the decline won’t stop till it reaches the $69 mark as it is now underneath the 50-day exponential moving average (ema). However, a bullish action might subsist considering only the candlestick top for today’s trading session.
Regardless, it is likely that brent would also be affected by the new COVID-19 strain currently ravaging several regions of the world. Thus, creating a possibility of a reduction in economic activities. Even if the authorities do not announce total lockdowns, there would be a slowdown in economic activities.