Crude Oil Latest: Trend Higher Still in Place Despite IEA Cutting Forecast For Demand
Crude oil price, news and analysis:
- The International Energy Agency has cut its forecasts of oil demand by 600,000 barrels per day for the first quarter of 2021 and by 300,000 for this year as a whole.
- It argues that a resurgence in coronavirus cases is slowing the rebound in demand.
- However, prices of both US crude and Brent continue to trend higher and for US crude the $55/barrel level is now in focus.
IEA cuts crude oil demand forecasts
The International Energy Agency, in its latest monthly oil market report, has lowered its forecasts of global oil demand by 300,000 barrels per day for this year, with the cut focused on the first quarter when the IEA has lowered its forecast by 600,000 bpd.
The IEA blames the resurgence in Covid-19 cases and fresh lockdowns, which it says are slowing a rebound in demand. However, this was largely ignored by the markets, with US crude continuing to climb within the upward channel on the charts in place since the recent low of just above $34 was reached on November 1 last year.
US Crude Oil Price Chart, Daily Timeframe (September 29, 2020 – January 19, 2021)
Source: IG (You can click on it for a larger image)
As the chart shows, a continuing climb would bring the $55/barrel level into focus, and that would be no surprise given market optimism that coronavirus vaccines will bring the pandemic under control. Note too that the Chinese economy grew by more than expected in the fourth quarter, with the GDP growth rate at 6.5% year/year.
There is also optimism that a large US stimulus package is on the way, with former Federal Reserve Chair Janet Yellen – proposed as the next US Treasury Secretary – to tell a Senate confirmation hearing that there is a need to “act big”.
Note also that fuel demand concerns remain but the IEA said that “the global vaccine roll-out is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode... But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales.”
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--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.