JMMC, Lockdowns, Vaccine Information in Focus

CRUDE OIL PRICE WEEKLY FUNDAMENTAL FORECAST: NEUTRAL

• Crude oil worth outlook is cautiously optimistic owing to constructive coronavirus vaccine information
• World crude oil demand has turned decrease amid renewed COVID-19 lockdown measures
• Crude oil costs may climb greater with OPEC+ more likely to delay a rise in manufacturing

Crude oil worth motion ripped and dipped over the previous 5 buying and selling periods. The commodity carefully tied to financial exercise spiked 15% greater to begin the week, however gave again about half of these beneficial properties to solely end up roughly 8% on stability from final Friday’s shut. A notable enchancment in market sentiment following the US presidential election, exacerbated by encouraging COVID-19 vaccine headlines, stand out as major catalysts fueling the newest rise in crude oil costs.

Resurfacing oil demand jitters, which largely stem from mounting coronavirus lockdown measures and the opposed influence on world GDP progress, doubtless weighed negatively on the commodity later within the week. That mentioned, crude oil costs would possibly regain just lately misplaced floor owing to the prospect that OPEC delays its deliberate manufacturing hike.

Although crude oil manufacturing in Libya may undermine OPEC+ efforts to maintain a lid on provide. Libya oil manufacturing has surged over current weeks to 1.2-million barrels per day. Likewise, detailed on the DailyFX Financial Calendar, US oil rig rely continues to climb and stock information from the Division of Vitality confirmed a rise of 4.3-million barrels.

These headwinds current draw back dangers to crude oil worth motion along with the dominant menace of resurfacing coronavirus considerations as new circumstances spike and lockdown measures are reintroduced. High central financial institution officers, reminiscent of Federal Reserve Chair Jerome Powell, have voiced adamantly how the financial restoration hinges largely on the course of the virus.

CRUDE OIL PRICE CHART WITH VIX INDEX OVERLAID: DAILY TIME FRAME (24 JUN TO 13 NOV 2020)

Chart by @RichDvorakFX created utilizing TradingView

To that finish, as a number of the world’s largest economies grapple with one other staggering wave of COVID-19, it comes as little shock that OPEC simply slashed its crude oil demand forecast for subsequent 12 months and the remainder of 2020 by 300Okay barrels per day. The IEA equally downgraded its outlook for crude oil demand final week. Nonetheless, constructive coronavirus vaccine information, like Pfizer reporting a 90% effectiveness in stopping COVID-19, stands to maintain markets optimistic and ahead wanting.

This growth, and to not point out the robust probability that OPEC+ delays its deliberate provide enhance, present potential of bolstering crude oil costs extra broadly. If the JMMC assembly subsequent week reveals little urge for food for OPEC suspending its manufacturing enhance, nonetheless, commodity merchants would possibly steer crude oil worth motion sharply decrease.

The course of the S&P 500-derived VIX Index, or fear-gauge, stands out as one other attainable bellwether to the place crude oil heads subsequent. Crude oil costs and the VIX Index are likely to mirror each other as highlighted by their usually damaging correlation. An abrupt bounce within the VIX may point out danger urge for food is souring, which might doubtless correspond with crude oil promoting stress. Conversely, if anticipated inventory market volatility continues to bleed decrease, crude oil costs would possibly edge again greater seeing {that a} decrease VIX sometimes signifies bettering dealer sentiment.

Preserve Studying –The way to Commerce Crude Oil: High Oil Buying and selling Methods & Suggestions

— Written by Wealthy Dvorak, Analyst for DailyFX.com

Join with @RichDvorakFX on Twitter for real-time market perception