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Crude Oil Price Outlook - Markets Continue to Nudge Higher But Covid-19 Fears Remain

Crude Oil Price Outlook - Markets Continue to Nudge Higher But Covid-19 Fears Remain

Nick Cawley, Strategist

Crude Oil Analysis, Price and Chart

  • Brent crude back at highs last seen nearly a year ago.
  • Brent eyes February 20 swing-high just under $60/bbl.
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Oil continues to move higher and back to levels last seen nearly one year ago. The recent OPEC+ supply agreement has kept the market better bid, while more optimistic investors are starting to look slightly further ahead with rose-tinted glasses. The US Treasury market is starting to signal that growth, and inflation, are on the horizon, while new US President Joe Biden is expected to reveal his new stimulus package which he says is in the USD trillions. This boost is expected to accelerate any economic bounce back, underpinning the demand for oil.

The ongoing pandemic, however, is expected to temper any future rally in oil with new infection rates and fatalities soaring around the globe. Vaccination programs have begun but most countries are playing catch-up with the damage the virus has already caused. This leaves the short-term outlook for oil flat to marginally negative until a marked decrease in Covid-19 cases is seen.

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Brent crude currently changes hands around $56.50/bbl, a fresh 10-month high. The price of crude has been moving gently higher since the start of November with the move supported by all three simple moving averages, with the 20-day sma, in particular, providing strong support from any sell-off. The next level of resistance is seen just under $60/bbl. The market is still in overbought territory, although not at the extreme levels seen last week, while volatility remains in check.

Brent Crude Oil Price Chart (January 2020 – January 12, 2021)

Crude Oil Price Outlook - Markets Continue to Nudge Higher But Covid-19 Fears Remain
Oil - US Crude BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 1% 5%
Weekly 30% -11% 6%
What does it mean for price action?
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IG retail trader data show42.50% of traders are net-long with the ratio of traders short to long at 1.35 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US Crude Oil prices may continue to rise.Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed US Crude Oil trading bias.

What is Market Sentiment and How Does it Work?

What is your view on Oil – are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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