AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Crude oil prices are showing strong momentum with the price of Brent crude oil futures crossing the USD 50 per barrel mark. Brent crude oil futures started the day’s session 0.05 per cent up on Friday after witnessing an intraday move of ~ 4.48 per cent during the previous trading session.
The Brent futures had reclaimed the +USD 50 territory for the first time since March 2020, when the first coronavirus news delt a serious blow to the crude oil market.
The primary reason that seems to be aiding for the oil market is the COVID-19 vaccine optimism, which, along with a spike in net imports across the United States is attracting bulls to the market.
Image Source: ©Kalkine Group 2020
The COVID-19 vaccine is getting rolled out on the global scale with Britain commencing vaccination this week, Canada approved its first vaccine on 9 December 2020 while suggesting that the initial shots would be delivered from in the ensuing week. Likewise, the United States is also anticipated to start inoculations around the weekend.
Image Source: ©Kalkine Group 2020
Therefore, the roll-out of COVID-19 vaccine coupled with a short-term demand boost indication from the United States is now galloping the oil bulls.
Also Read: OPEC+ Delays Production Cut Decision, November Rally Halts
On the demand front, the United States commercial crude oil inventory for the week ended 4 December 2020 spiked to 15.2 million barrels as compared to the previous week decline of 0.679 million barrels.
The sharp build in the commercial inventory for the period ended 4 December 2020, which took the commercial inventory to 503.2 million tonnes was thoroughly followed by a sharp increase in net imports, reflecting on a recovery in the domestic consumption for the period.
Furthermore, the inventory surge marked a new high since April 2020 with a record high in net weekly imports of 2.7 million barrels per day.
A short-term change in demand dynamics along with the vaccine optimism, propelled crude oil prices.
Crude oil on charts
Brent Crude Oil Futures Continuous Daily Chart (Source: Refinitiv Eikon Thomson Reuters)
On following the daily prices of Brent crude oil futures (continuous series), it could be seen that post giving a volatility breakout in late November 2020 with prices crossing the +2 Standard Deviation of the 20-day simple Bollinger Band®; the Brent oil futures are trading at the upper range of the band, reflecting on the prevailing bullish sentiments.
Furthermore, the price of the commodity is currently trading above the 200-day EMA and 50-day EMA, suggesting that the primary trend is once again an uptrend, mitigating the risk of the current rally being a dead cat bounce.
Also, the pair of EMAs are now showing a positive crossover with the 50-day EMA crossing the 200-day EMA from below.
On further applying the series of directional technical indicators, it could be seen that the + DI is trading above the -DI with a positive crossover around early March 2020, reflecting on the bullish strength. Apart from that, the ADX is sloping upwards, confirming that the oil market is currently trending.
Moreover, the current rally in Brent futures is well supported by large participation, which could be inferred from an upward sloping On Balance Volume (OBV) moving in tandem with the price action.
