Oil traders are arbitrarily going long on recent released data from the American Petroleum Institute showing the U.S economy demand for energy is on the rise amid an era of growing COVID-19 caseloads disrupting major economic hubs around the world.
Oil prices rallied to pre-COVID-19 pandemic levels, as oil bulls pushed the prices of Brent crude as high as $57.41 after jumping on a larger U.S crude inventory drop, far more than what energy experts had anticipated earlier.
Also, a weaker greenback helped; coupled with complimented numerous price revisions by several energy analysts that oil prices might break above $60 per barrel in Q1, 2021.
In addition, oil traders are riding the price wagon high on the bias that the remainder of the week price action in the U.S dollar index points to more upsides for crude oil prices, on the account that the U.S central bank policy makers are expected to remain dovish and such will keep oil prices supported, as oil is priced in dollars.
However, the coast isn’t yet clear for Oil bulls. Oil traders are aware of the risks remaining, amid a wave of mutant strains of COVID-19 disrupting key markets particularly in the Northern Hemisphere, although recent price action shows it now appears there is a clearer path to oil upsides with downside risks diminishing day by day.
That said, a significant amount of oil traders still believe US shale producers’ reaction to the rally in the oil market might pose a short-term supply risk for oil, meaning it remains to be seen whether oil prices might be able to break higher in the coming weeks as the world’s largest importer of oil, China grapples with its biggest COVID-19 spike in months.