Oil Price Fundamental Daily Forecast – Steady to Higher Ahead of API Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher at the mid-session on Wednesday, underpinned by expectations that the new U.S. administration will deliver massive stimulus spending that would lift demand, as well as by OPEC output curbs, additional voluntary production cuts by Saudi Arabia in February and forecasts calling for a drop in U.S. crude inventories in this week’s government report.

At 16:07 GMT, March WTI crude oil is trading $53.46, up $0.48 or +0.91% and March Brent crude oil is at $56.37, up $0.47 or +0.84%.

Yellen Sets the Bullish Tone

Janet Yellen, U.S. President Joe Biden’s nominee for Treasury Secretary, set a bullish tone for crude oil traders when she urged lawmakers on Tuesday to “act big” on coronavirus relief spending, arguing that the economic benefits far outweigh the risks of higher debt burden.

Yellen also said that the value of the dollar should be determined by markets, a break from departing President Donald Trump’s desire for a weaker U.S. currency. This is important because crude oil is a dollar-denominated commodity. So when the dollar weakens, crude oil becomes cheaper to foreign buyers.

Yellen also made comments that suggest demand for gasoline could face some headwinds during the Biden administration. Yellen called climate change an “existential threat” to the U.S. economy and said she would appoint a senior official at Treasury to oversee the issue and assess systemic risks it poses to the financial system.

She added investment in clean technologies and electric vehicles was needed to cut carbon emissions, keep the U.S. economy competitive and provide good jobs for American workers.

American Petroleum Institute Weekly Inventories Report

At 21:30 GMT, the API will release its weekly inventories report. It is expected to show crude stocks fell by 300,000 barrels in the week to January 15.

Short-Term Outlook

Sentiment is being supported by Yellen’s declaration for the government to “act big” on stimulus. Traders believe a surge in debt-funded spending would be a positive for the global economy, demand for crude oil and commodity prices in general. Meanwhile, it would put pressure on the U.S. Dollar that would boost foreign demand for dollar-based crude oil.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Quiet

WTI Crude Oil

The West Texas Intermediate Crude Oil market continues to be relatively noisy as we are hanging around the middle of the overall consolidation area between the $55 level on the top, with the $50 level on the bottom. This is a market that I think will continue to see a lot of noise overall, due to the fact that there are a lot of questions when it comes to overall demand. I do not see how demand picks up significantly, despite the fact that they are calling for stimulus to drive prices higher. If crude oil rallies, it is going to be due to the US dollar falling more than anything else as we had already seen a lack of demand before the pandemic hit.

Crude Oil Video 21.01.21

Brent

Brent markets were slightly positive during the trading session on Wednesday initially but gave back the gains as we are getting a bit exhausted. I think at this point we are starting to ask the question as to whether or not we can continue to go to the upside, and quite frankly I think at this point we are getting stretched. I do expect to see a bit of a pullback in the short term, perhaps back down towards the $50 level area. The Brent market will suffer at the lack of demand going forward, and therefore I believe that eventually we have to come to grips with the idea that simple stimulus will not be enough to send oil markets screaming to the upside any further. At this point in time, I think that short-term selling might be possible, but you need to be very cautious about overexposing yourself.

For a look at all of today’s economic events, check out our economic calendar.

Oil Gains Ground On Stimulus Optimism

Oil Video 20.01.21.

Oil Tries To Settle Above Multi-Month Highs

WTI oil made an attempt to settle above multi-month highs at $53.90 as traders focused on Joe Biden’s stimulus plans.

The market believes that Joe Biden will not face significant resistance against the $1.9 trillion stimulus package, and that the direct support to consumers will boost oil demand in the near term.

Judging by the recent coronavirus data from the U.S., traders should not expect strong virus containment measures which may deliver another blow to the domestic oil demand.

While Joe Biden has many times stated that he planned to boost coronavirus response, his measures will likely be focused on increased healthcare funding rather than restrictions on mobility which is good for the oil market.

Oil traders have successfully ignored the constant flow of bad news from Europe which struggles to contain the second wave of the virus, and it looks like only a true catastrophe may attract their attention. The market remains in a bullish mood, and expectations of another round of stimulus may serve as the catalyst that will push WTI oil towards the $55 level.

Analysts Expect That Crude Inventories Will Continue To Decline

The market’s optimism will soon get tested by crude inventory reports from API and EIA which will indicate whether the current oil demand is strong enough to push inventories to lower levels.

Currently, analysts expect that crude inventories will decrease by about 0.3 million barrels. The previous EIA Weekly Petroleum Status Report showed that crude inventories decreased by 3.2 million barrels and were about 8% above the five-year average for that time of the year.

Thus, the pace of crude inventory draw is expected to decrease. Inventories have been declining since early December so the continuation of this trend may provide psychological support to the market. At the same time, a sudden increase in crude inventories may hurt the market’s mood as oil remains near multi-month highs which increases its sensitivity to such news.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Move Higher Ahead Of Joe Biden’s Inauguration

Traders Remain Optimistic As Biden Takes Office

S&P 500 futures are gaining ground in premarket trading as traders prepare for the first term of the new U.S. President Joe Biden.

Biden is expected to sign many executive orders in the first days of his presidency, reversing some of Donald Trump’s policies and boosting response to the coronavirus pandemic.

The market clearly provides Biden with the benefit of the doubt and expects that the new President will be able to provide additional support to the U.S. economy.

Market’s main focus is the new $1.9 trillion stimulus plan which should boost consumer spending at a time when Retail Sales have started to show weakness under the pressure from the second wave of the virus. If Biden succeeds in delivering the new stimulus package in the upcoming weeks, stocks will have an opportunity to gain strong upside momentum.

Janet Yellen Urged Lawmakers To “Act Big”

Yesterday, Janet Yellen stated that U.S. lawmakers should “act big” on the new coronavirus aid package to provide support to the economy.

She argued that the benefits of additional stimulus outweighed the risks of higher debt levels. Yellen’s dovish stance may serve as an additional upside catalyst for the markets.

Interestingly, foreign exchange market traders have not made up their minds on the impact of the new stimulus package, and the U.S. dollar was volatile but lacked direction in recent days. Meanwhile, stock traders are clearly optimistic about Yellen’s future policies.

Oil Moves Towards Multi-Month Highs

WTI oil is currently trying to get to the test of the recent highs at $53.90 as traders bet that the new round of stimulus will boost demand for oil.

Oil-related stocks had a strong trading session on Tuesday and look set to continue their upside move as investors put more money into the sector due to rising oil prices.

Oil traders have managed to ignore all negative developments on the coronavirus front and focused on the long-term picture. The current market mood remains bullish, and WTI oil has a good chance to get above recent highs and move towards the $55 level.

For a look at all of today’s economic events, check out our economic calendar.

Oil Traders Weigh America’s Future Relationship with Key Oil Players

With the Biden inauguration scheduled to hold at the U.S capitol today, oil traders are a tad concerned about what foreign policy stand his presidency will take has regard to U.S future relationship with key oil producers that include Iran, Saudi Arabia, and Russia.

One of the wild cards some energy experts are envisaging is an upside to Iranian current oil production level dependent on the potential lifting of America’s sanctions under the incoming U.S president.

Such action however could affect crude oil demand/supply rebalancing negatively taking into consideration that the global economy hasn’t yet recovered amid rising COVID-19 cases globally thereby making a strong case on crude oil prices plunging below $50/Barrel once again.

Oil bulls are taking control of the prevailing oil price action on the account that open interest in the black liquid hydrocarbon is on the rise, as leading hedge funds momentarily in large numbers consider investing into the commodity asset class. This is because many oil traders consider the black fossil as a hedge against inflationary pressures.

In buttressing the bullish bias in play recent data reveal there has been an upsurge in the number of Oil bulls in the past week. About 163 money managers placed bullish bets on Brent Crude and West Texas Intermediate in the previous week showing the highest uptick demand by such fund managers in 11 months.

Brent crude the global benchmark for crude is expected to reach $60 in Q1, 2021 amid unprecedented stimulus programs expected to be unveiled by the incoming Joe Biden Presidency.

Also, Oil prices are being supported by the falling value in the greenback on the fact that the weaker U.S dollar lends support to crude oil prices since it’s denominated in U.S dollars.

The U.S dollar is expected to remain under pressure, at least in Q1, 2021 as it would be in the interest of the U.S. economy to keep the dollar lower in order for U.S leading companies to remain competitive coupled with spurring local consumption at the world’s largest economy. Such macro would aid crude oil prices in the mid-term.

For a look at all of today’s economic events, check out our economic calendar.

Oil Attempts To Settle Above The $53 Level

Oil Video 19.01.21.

IEA Cuts First-Quarter Oil Demand Outlook By 0.6 Million Barrels Per Day

IEA has recently released its monthly Oil Market Report and cut its oil demand outlook for the first quarter and full year. IEA expects that world oil demand will be 0.6 million barrels per day (bpd) lower in the first quarter of 2021 due to coronavirus-related restrictions in Europe.

For the full year, IEA reduced its previous demand forecast by 0.3 million bpd. Currently, it expects that global oil demand will manage to grow by 5.5 million bpd in 2021 after a decline of 8.8 million bpd in 2020.

At this point, it looks like oil traders are ready to ignore downside revisions of oil demand forecasts as they expect that Saudi Arabia’s additional production cut will offset the negative impact of lockdowns in Europe.

According to recent reports, Germany will extend the current lockdown until February 14, 2021 as the country tries to stop the spread of the virus. Most likely, the market has already priced in the extension of all European lockdowns and may be even ready for additional bad news. The recent trading sessions have highlighted the bullish mood of oil traders as oil managed to quickly recover from the sell-off which happened at the end of the previous week.

Oil May Get A Boost From Yellen’s Comments

Today, U.S. Treasury Secretary nominee Janet Yellen stated that the value of currencies should be determined by markets and that expanding jobless benefits would provide a boost the economy.

Well-known for her dovish views, Janet Yellen supports the huge $1.9 trillion stimulus package which has been recently unveiled by President-elect Joe Biden. The additional stimulus may boost the domestic demand for oil and push crude inventories to lower levels.

In addition, the future dovish policy of the former Fed Chair may put additional pressure on the U.S. dollar which started the year on a strong note but continues to trade not far from multi-month lows against a broad basket of currencies. Weak dollar is bullish for dollar-denominated commodities, including oil. If the U.S. dollar moves lower, oil may find additional support.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Short-Term Strength Over $52.88, Weakens Under $51.81 with $50.63 Next Target

U.S. West Texas Intermediate crude oil futures are edging higher on Tuesday shortly after the regular session opening as a weaker U.S. Dollar drove up demand for the dollar-denominated asset. The market was also boosted by optimism that government stimulus will eventually lift global economic growth and oil demand, somewhat offsetting concerns that renewed COVID-19 pandemic lockdowns would weaken fuel consumption.

At 15:34 GMT, March WTI crude oil futures are trading $52.96, up $0.54 or +1.03%.

In other news, the International Energy Agency (IEA) cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on January 13.

A trade through $53.94 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $47.31.

The minor trend is down. This confirmed the shift in momentum. A trade through $53.86 will change the minor trend to up.

The minor range is $53.94 to $51.81. Its 50% level at $52.88 is currently being tested.

The short-term range is $47.31 to $53.94. Its 50% level at $50.63 is the next downside target.

Daily Swing Chart Technical Forecast

The early price action indicates the direction of the market into the close will be determined by trader reaction to $52.88.

Bullish Scenario

A sustained move over $52.88 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of $53.94. Taking out this level will put the market back on track for an eventual test of the January 8, 2020 main top at $57.41.

Bearish Scenario

A sustained move under $52.88 will signal the presence of sellers. This could trigger a break into the intraday low at $51.81. Taking out this level will signal a resumption of the downtrend with $50.63 the next likely downside target.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Recovers Slightly on Tuesday

WTI Crude Oil

The West Texas Intermediate Crude Oil market rallied a bit after gapping lower at the open on Tuesday. At this point, we are simply trading on the idea of stimulus, and nothing more. That is what is driving the commodity trade in general, not necessarily the idea of demand. (Yes, I understand that stimulus is supposed to drive up demand, but it has in the last three times.) Nonetheless, it is the game we are playing right now so looks like buying dips continues to work. I believe that the $50 level is the “floor the market”, with the $55 level above being the current resistance barrier that the market is eyeing. Pay close attention to the US dollar, because the inverse correlation probably continues.

Crude Oil Video 20.01.21

Brent

Brent markets also gap lower to kick off the trading session only to turn around and show signs of life again. By doing so, the market then looks likely to test this $56.50 level that had caused resistance during the previous session, and perhaps even go higher. You could make an argument for a little bit of a bullish flag, but at the end of the day it is probably a weak one at best. The Brent market of course continues to move based upon the idea of the reflation trade, which although in full effect right now, certainly has to be thought of as precarious at best. After all, it seems like the matter what happens, there are more lockdowns coming on an almost daily basis. Looking forward, the idea is that we will be beyond that, but crude oil demand was slipping before the virus hit.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Move Higher Ahead Of Yellen Speech

Treasury Secretary Nominee Janet Yellen Is Expected To Support The Huge Stimulus Package

S&P 500 futures are gaining ground in premarket trading as traders expect that Janet Yellen will support Biden’s $1.9 trillion stimulus package when she speaks before the Senate Finance Committee.

Yellen is projected to state that the stimulus package is a vital instrument in the combat against the consequences of the coronavirus pandemic, and that the U.S. debt burden is not a concern right now.

Yellen is also projected to commit to market-determined exchange rate of the U.S. dollar, in contrast with the outgoing President Donald Trump who has many times stated that he wanted a weaker U.S. dollar.

However, it remains to be seen whether Yellen’s comments will provide additional support to the U.S. dollar which is currently losing ground against a broad basket of currencies. The new stimulus package may ultimately serve as a bearish catalyst for the American currency and push it to multi-month lows.

IEA Cuts Its Oil Demand Forecast

IEA decided to cut its oil demand outlook by 0.3 million barrels per day (bpd) due to continued problems on the coronavirus front.

This is not a big surprise to the market as traders are prepared to see poor demand data in the first quarter of 2021 due to lockdowns in Europe.

Another downside revision of the full-year oil demand forecast did not spoil the mood of oil traders, and WTI oil is currently trying to settle above $52.50.

Not surprisingly, oil-related stocks are set for a strong start of the trading session after the correction on Friday.

Precious Metals Lack Momentum As Higher Yields Reduce Demand For Gold And Silver

Gold and silver have been trying to stabilize after the sell-off which happened at the beginning of this year.

The recent rebound of the U.S. dollar put additional pressure on precious metals, but rising U.S. Treasury yields were the main negative catalyst.

The bond market may be sensitive to Yellen’s speech before the Senate Finance Committee, so gold and silver may have an active trading session today. Gold and silver mining stocks, which have recently suffered a significant correction, may also be volatile today.

For a look at all of today’s economic events, check out our economic calendar.

Even When She Speaks Softly, She’s Yellen

After posting the first back-to-back decline this year, the MSCI Asia Pacific Index bounced back today, led by a 2.7% gain in Hong Kong (20-month high) and a 2.6% rise in South Korea’s Kospi. The Nikkei and Taiwan’s Stock Exchange rose by more than 1%. Europe’s Dow Jones Stoxx 600 eked out a small gain yesterday and is a little higher today. The S&P 500 fell in the last two sessions for a loss of a little more than 1% and is trading about 0.6% better now.

The US 10-year is firm at 1.11%, while European bonds are little changed, and the periphery is doing better than the core. Of note, France’s 50-year bond sale was greeted with a record reception. The dollar is lower against all the major currencies, but the yen. Most emerging market currencies are firmer as well. We see the dollar’s pullback as part of the larger correction that began almost two weeks ago.. Gold recovered smartly from yesterday’s test on $1800 to return to the 200-day moving average (~$1845). February WTI reversed lower ahead of the long holiday weekend and made a marginal new low today (~$51.75) before recovering nearly a dollar.

Asia Pacific

According to the recent government data, China’s rare earth exports fell by more than a quarter to what Reuters estimates are the lowest in five years. China attributed it to weaker global demand, but there is something else going on. Yesterday, China indicated that a new mechanism will be created to decide, coordinate, and regulate the rare earth supply chain (including mining, processes, and exporting).

Rather than exporting rare earths, China’s industrial policy aims to export products containing rare earths. Move up the value-added chain. The big push now apparently is for batteries for electric vehicles. The PRC has become a net importer of rare earths that it processes. Its imports often come from mines it owns outright or has an important stake. For example, the Democratic Republic of Congo is responsible for 60% of the world’s cobalt.

There are 12 mines, and reports suggest China has a stake in each, and more than 85% of the cobalt exports are headed to China. In 2018, China provided around 80% of US rare earths, and at least one mine in the US sends the material to China to be processed.

For the past several sessions, the dollar has forged a base in the JPY103.50-JPY103.60 area and is probing the JPY104.00 level. The high from January 14 was about JPY104.20, and there is an option for roughly $360 mln at JPY104.35 that expires later today, just shy of last week’s high near JPY104.40. The Australian dollar closed below its 20-day moving average yesterday (~$0.7100) for the first time in a little more than two months.

It rebounded earlier today to $0.7725. The session high may not be in place, and we suspect there is potential toward $0.7740. The dollar’s reference rate was set at CNY6.4883, practically spot-on median expectations in the Bloomberg survey of bank models. The dollar’s four-day advance was snapped today. It has risen from almost CNY6.45 and stalled in front of CNY6.50. Faced with an increase in interbank borrowing costs for the ninth consecutive session, the PBOC injected CNY75 bln in seven-day cash via repo agreements.

It is the first injection after draining for the past six sessions, and it was the largest supply of funds this month. Some liquidity appears to be going into equities, and Chinese traders reportedly bought a record $3.4 bln of HK shares today.

Europe

Despite Germany’s social restrictions, which may be tightened and extended, business sentiment held in better than feared. The ZEW survey assessment of current conditions did not deteriorate as economists expected, though it did not really improve, either. The -66.4 reading compares with -66.5 in December. However, the expectations component rose to 61.8 from 55.0. This is the highest since September and more than anticipated.

The UK Prime Minister, who holds the rotating G7 presidency, has invited South Korea, India, and Australia to the summit in June. Moreover, reports suggest Johnson intends on getting them involved right away, which seems aggressive. It appears to be causing some consternation among other members. Germany, Japan, France, and Italy are opposed.

Italy’s Prime Minister Conte survived the vote of confidence in the Chamber of Deputies yesterday, and today’s challenge is in the Senate. The government support is thinner. However, the ability to secure a majority is somewhat easier given that Renzi’s party will abstain, though it will still be close. A defeat could see Italian bonds sell-off, but Conte will seek to broaden the coalition in the existing parliament before elections are required. This could include independents or members of center-right parties.

Two central bank intervention announcements last week caught our attention. First, Sweden’s Riksbank announced a three-year plan to purchase SEK5 bln a month. The purpose is to fund reserve purchases in SEK and pay down the SEK178 bln fx loans from the National Debt Office, which is thought to be about 70% in US dollars.

The krona was trending lower this year against both the dollar and euro, which follows the krona’s appreciation in the last few months of 2020. The impact is minor in terms of average daily turnover, estimated to be around SEK300-SEK320 bln almost equally divided between euros and dollars.

Second, the Israeli shekel soared in recent months and reached levels not seen since Q1 1996. The Bank of Israel intervened and bought $21 bln in all of 2020, with almost $4.5 bln in December alone, and still the shekel appreciated by 7.5% and nearly 3%, respectively. Businesses and investors were crying for relief. The central bank announced it would buy $30 bln this year, which triggered a powerful short-covering rally that carried the dollar from nearly ILS3.11 to almost ILS3.29 by the end of last week.

Dollar sellers emerged yesterday. It is steadier today, but in wider ranges than typically seen before. Its preannounced intervention war chest may ultimately prove insufficient to prevent shekel appreciation. The $30 bln is roughly twice its current account surplus, but foreign direct investment inflows are nearly the same size as the current account surplus. And yet, net portfolio inflows should be expected, but most importantly, how Israeli offshore investment is managed can be impactful.

Profit-taking on foreign investments or hedging the currency risk, even on a small fraction of the roughly $470 bln of foreign stocks and bonds owned by Israelis, can be a significant force rivaling the current account and direct investment-related flows.

The euro was sold a little below $1.2060 yesterday, its lowest level since December 1st. It reached $1.2130 in the European morning, and the $1.2140 area is the halfway point of last week’s decline. The bounce has left the euro’s intraday momentum indicator stretched.

We expect North American dealers will take advantage of the upticks for a better selling opportunity. Also, note there are around 4.1 bln euros of $1.2190-$1.2200 options that roll-off today. Sterling recovered a little more than a cent from yesterday’s lows (~$1.3520) to today’s high. It faces resistance near $1.3635. Tomorrow the UK reports December CPI figures, and a small uptick is expected.

America

The Senate holds the confirmation hearing for Yellen. She was the first woman to head the Federal Reserve, and she will be the first woman to lead the US Treasury, and the first person to have held both posts. It is a reflection of our age. Like the current Federal Reserve, the former Chair can be expected to recognize the need for fiscal support, while at the same time acknowledging that deficits will decline on the other side of the emergency.

The stock of debt is elevated, but it not extreme in relative or absolute terms. Despite higher debt in 2020, the servicing costs appear to have fallen. Moreover, as the economy grows faster than the level of interest rates, debt will decline as a percentage of GDP. Her remarks on the dollar will be scrutinized. To demonstrate the Biden Administration’s multilateral thrust, at this juncture, it is sufficient for Yellen to acknowledge the G7/G20 position that exchange rates are best set by the market.

At the end of last year, the US Treasury cited Switzerland and Vietnam as currency manipulators. She may be asked about those, and of course, the yuan. The new US Treasury model had the yuan a few percentage points undervalued. However, it is interesting to note that when adjusted for GDP per capita, The Economist Big Mac index of purchasing power parity has the yuan slightly (~2.5%) overvalued.

The economic calendars for North America are light today. The Treasury’s International Capital (TIC) for November will be reported today at the end of equity trading. Capital flows were volatile at the onset of the pandemic, but long-term inflows averaged $23.56 bln in the first ten months of 2020 compared with an average of $27.21 bln in the same period in 2019 and $54.32 bln in the Jan-Oct period in 2018.

The week’s highlight includes the January Philadelphia Fed survey Thursday and weekly jobless claims, as well as Friday’s preliminary PMI. Canada reports the December CPI tomorrow, shortly before the outcome of the Bank of Canada meeting is announced. Although the consensus is for a standpat outcome, a “mini-cut” cannot be ruled out given the official rhetoric. The current overnight target rate is 25 bp. The main feature for Mexico is the December unemployment figures on Thursday. Brazil’s central bank meets tomorrow, and the is little chance of a change in the 2% Selic rate.

Last Thursday, the US dollar recorded its lowest level against the Canadian dollar since April 2018 (~CAD1.2625). Between the modest greenback strength seen yesterday and expectations that Biden cancels the XL pipeline, the US dollar tested CAD1.28. It has come back offered today and is testing the CAD1.2720 area in the European morning.

It can fall a bit further in the North American session, but we look for support in the CAD1.2690 area to hold. That said, a break could signal a move toward CAD1.2640. The greenback held below MXN20.00 yesterday and reversed lower, closing a little under MXN19.69. It has taken out yesterday’s low (~MXN19.66) but struggles to maintain the downside momentum. A move above MXN19.75 would suggest a return to MXN20.00 is likely.

The dollar fell from BRL5.5160 last week, its highest level since mid-Movember, to BRL5.20. The low from earlier this month was around BRL5.12, and there is scope for a re-test.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Surging COVID Cases Raising Doubts About How Long Demand Would Hold Up

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Tuesday as traders return from Monday’s U.S. bank holiday. The early tone is being set by bullish traders hoping that government fiscal stimulus will bolster global economic growth and demand enough to offset renewed coronavirus pandemic lockdowns that could dampen fuel consumption.

At 08:09 GMT, March WTI crude oil futures are trading $52.64, up $0.22 or +0.42% and March Brent crude oil is at $55.28, up $0.18 or +0.33%.

The changes are based on Friday’s close since there was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

China’s 2020 Refinery Output Rises 3% to Record; Gas Output Up Nearly 10%

Crude oil prices are being partly underpinned by the news that China’s refineries posted record throughput in 2020, processing 3% more crude oil than a year ago, as they took advantage of low prices and healthy margins on a quick rebound in domestic fuel demand from the coronavirus pandemic.

Annual throughput stood at 674.41 million tonnes in 2020, or about 13.45 million barrels per day, up roughly 410,000 bpd from 2019, data from the National Bureau of Statistics showed.

December output rose 2.1% on the year to a monthly record at 60 million tonnes, or about 14.13 million bpd, a touch below the daily record set in November, which has one less day, at 14.2 million bpd.

Main Support Coming from Saudi Arabia’s Voluntary Supply Cuts

WTI and Brent crude oil have been primarily supported since the new year began by Saudi Arabia’s additional supply cuts in February and March which are expected to draw down global inventories by 1.1 million barrels per day in the first quarter.

Daily Forecast

Traders could sit on their hands the next two sessions as they await U.S. President-elect Joe Biden’s inauguration speech on Wednesday evening (local time). Bullish traders will be looking for more detail on his $1.9 trillion aid package, proposed last Thursday.

Concerns about rising COVID-19 cases globally and renewed lockdowns weighing down fuel demand are expected to keep a lid on oil prices until another vaccine becomes available and/or the number of new COVID-19 cases start to retreat significantly.

ANZ analysts flagged concerns about falling fuel sales in India in January from December and rising COVID-19 cases in China and Japan that could dampen oil demand.

“In Europe and the U.S., the slow rollout of vaccines is also raising concerns that a rebound in demand will remain elusive,” the bank said.

For a look at all of today’s economic events, check out our economic calendar.

Oil Tries To Settle Back Above The $52 Level

Oil Video 18.01.21.

The Number Of U.S. Rigs Drilling For Oil Continues To Move Higher Together With The Price Of Oil

The recent Baker Hughes Rig Count Report indicated that the number of U.S. rigs drilling for oil increased by 12 to 287 as oil producers continued to add rigs in response to the latest developments on the oil price front.

Interestingly, U.S. domestic oil production remained unchanged at 11 million barrels per day (bpd) for several weeks despite the regular increase in the number of drilling rigs.

The stable level of the U.S. domestic oil production has provided significant support to the market and facilitated a decline in crude inventories.

This week, EIA will release its regular Weekly Petroleum Status Report on Friday, January 22, so traders will have to wait a few more days before they will have a chance to see whether the U.S. domestic oil production has started to increase. If oil production remains at current levels, oil may get a boost as inventories will likely continue to decline in this scenario.

Oil Will Likely Ignore The Recent Lockdowns In China Unless The Situation Gets Much Worse

Oil has recently corrected from multi-month highs as some traders used the latest lockdowns in China as an excuse to take some profits off the table after a major rally.

China has just reported that is fourth-quarter GDP grew by 6.5% year-over-year while Industrial Production increased by 7.3% in December, highlighting its role as the main driver of the current rebound in the world demand for oil.

Thus, traders will closely monitor the developments on the coronavirus front in China as additional lockdowns may hurt demand. At this point, China has imposed lockdowns on about 30 million people. While the number looks huge, it’s just a tiny fraction of China’s population of more than 1.4 billion so the situation is not serious from the demand point of view.

The current mood in the oil market remains bullish thanks to Saudi Arabia’s decision to cut oil production by 1 million bpd in February and March, and oil will likely need additional downside catalysts to move lower.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Sluggish on Monday

WTI Crude Oil

The West Texas Intermediate Crude Oil market gapped lower to kick off the trading week on Monday, but then turned back around to show signs of strength as we filled the gap. That being said, I think it is only a matter of time before we go back and forth, and as a result it is likely that we are going to see this market trade between the $55 level on the top, and the $50 level on the bottom. Looking at the 50 day EMA, we are looking at a market that is trying to see this indicator catch up an offer support. However, pay attention to whether or not there is enough demand, because quite frankly there has not been for a long time. Yes, I realize there stimulus out there, but the question then remains whether or not it will actually drive prices higher?

Crude Oil Video 19.01.21

Brent

Brent markets have gapped lower to show signs of weakness off the bat as well, but then turned around to fill the gap. The $55 level is an area that is “fair value” between the two major areas of support and resistance. It is worth noting that the 50 day EMA is breaking just above the $50 level, so I think that adds even more credence to the idea of buyers being down there. All things being equal, I think this is a market that probably needs to drift a little bit lower as it got ahead of itself in the short term. I think at this point in time it is more than likely going to find plenty of buyers underneath we just simply have gotten a bit stretched.

For a look at all of today’s economic events, check out our economic calendar.

Stock Traders Wait For Clarity On Stimulus

The New Stimulus Package Will Remain In Spotlight In The First Days Of Biden’s Presidency

U.S. President-elect Joe Biden has recently unveiled his stimulus plan which is worth as much as $1.9 trillion. Theoretically, the huge stimulus announcement should have served as a significant upside catalyst for stocks. In practice, traders have doubts about whether the stimulus plan will remain intact during negotiations between lawmakers.

As a result, S&P 500 has corrected from recent highs but remains close to all-time high levels. The recent Retail Sales report showed that Retail Sales decreased by 0.7% month-over-month in December as the second wave of the virus put pressure on consumer activity. On a year-over-year basis, Retail Sales were up by 2.9%.

The U.S. economy clearly needs another round of stimulus, and markets may give more weight to this topic compared to the earnings season as companies’ reports reflect past performance while the new stimulus package will have a major impact on the future performance of the economy.

The U.S. Dollar Continues To Rebound

The U.S. dollar finished the previous year on a weak note and looked ready to continue its downside move. However, the American currency has found support in the early days of this year and continues to rebound against a broad basket of currencies.

The main driver of this rebound was the sell-off in the U.S. Treasury market which pushed Treasury yields to multi-month highs. However, Treasury yields have pulled back from recent highs while the U.S. dollar continued to move higher.

The continuation of the current rebound may have a significant impact on commodities and stocks so traders should watch this situation closely. If traders and investors continue to increase their purchases of the safe-haven dollar, riskier assets may find themselves under pressure.

Oil Will Try To Move Higher Despite The Extension Of Lockdowns In Europe

Oil has slipped from recent highs as traders took some profits after a major upside move which was supported by declining inventories and Saudi Arabia’s decision to cut production by 1 million barrels per day in February and March. Oil-related stocks also corrected from multi-month highs.

The recent data from China which indicated that the country’s Industrial Production increased by 7.3% year-over-year in December may provide additional support to oil as it showed that the main driver of the current oil demand rebound was in decent shape.

The main risk for oil and oil-related stocks in the near term is the situation in Europe which will likely have to leave significant virus containment measures until the end of the first quarter. However, traders have previously managed to ignore the negative developments in Europe so oil has decent chances to continue its upside move.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Weekly Forecast – Firming US Dollar, Global Demand Concerns Driving the Price Action

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished mixed last week as the rally ran out of steam amid new coronavirus-related demand concerns and worries over a slowing U.S. economy.

The news was just bearish enough to encourage investors to lighten up on the long side, which suggests a short-term correction may be in the making. Longer-term traders are not too worried since they expect OPEC+ production cuts and Saudi Arabia’s voluntary output reductions to provide amble support.

Last week, March WTI crude oil settled at $52.42, up $0.16 or +0.31% and March Brent crude oil finished at $55.10, down $0.89 or -1.62%.

To Recap the Week:

US Government Reports Another Bullish Draw

The market is also being underpinned by another reported drawdown in U.S. crude oil stockpiles, though gasoline and distillate inventories rose as refiners ramped up output to the highest level since August, the Energy information Administration said on Wednesday.

Crude inventories fell by 3.2 million barrels in the week to January 8 to 482.2 million barrels, compared with expectations in a Reuters poll for a 2.3 million-barrel drop. U.S. gasoline stocks rose by 4.4 million barrels in the week to 245.5 million barrels, compared with expectations for a 2.7 million-barrel rise. Distillate stockpiles rose by 4.8 million barrels in the week, versus expectations for a 2.7 million-barrel rise.

Refinery crude runs rose by 274,000 barrels per day in the last week, the EIA said. Refinery utilization rates rose by 1.3 percentage points, in the week, boosting overall refining use to 82% of capacity, highest since August.

China Crude Imports Jump in 2020

Crude imports into China were up 7.3% in 2020, with record arrivals in two out of four quarters as refineries increased runs and low prices prompted stockpiling, customs data showed on Thursday.

IEA Says Oil Market Outlook Clouded by Vaccine Roll-Out Variables

Oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, and official with the International Energy Agency (IEA) said on Wednesday.

Biden Pledges New COVID Relief

U.S. President-elect Joe Biden on Thursday revealed details of a $1.9 trillion coronavirus rescue package. Biden’s proposal, called the American Rescue Plan, includes some familiar stimulus measures in the hope of sustaining families and companies till vaccines are widely distributed. Some of the proposed measures include stimulus checks as well as unemployment support.

US Recovery Weakening

On Thursday, the Labor Department’s weekly jobless report showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in COVID-19 infections.

U.S. retail sales fell for a third straight month in December amid job losses and renewed measures to slow the spread of COVID-19, the Commerce Department reported on Friday, further evidence the economy lost speed at the end of 2020.

Weekly Forecast

At the end of last week, crude oil prices were being controlled by the U.S. Dollar and worries over rising coronavirus cases in China. We expect to see much of the same this week as a drop in risk sentiment due to a weakening U.S. economy is expected to continue to drive investors into the safe-haven greenback. Since crude oil is a dollar-denominated asset, foreign demand is expected to come in lighter, pressuring prices.

We should learn a lot about the spread of COVID-19 cases in China over the near-term by its decision as to whether citizens will be allowed to travel to various cities to celebrate the Lunar New Year in February.

For a look at all of today’s economic events, check out our economic calendar.

Darkest Before Dawn

This includes the release of the preliminary January PMI figures at the end of the week. Japan is extending its national emergency to another five prefectures, which collectively account for over half of the nation’s GDP. Germany’s Merkel, not given to hyperbole, warns that the lockdown may last ten more weeks. The Dutch do not appear far behind. England is talking bot tightening its restrictions. Even China appears to be experiencing a flare-up. The pandemic is out of control in the US, although the curve appears to be flattening in some areas.

It was widely recognized that the virus and vaccine are going to dictate the economic story in 2021. The new variant of the virus is more contagious and the roll-out of the vaccine has been frustratingly slow in most countries. The recovery in Q3 seen among the high-income countries was a dramatic snapback but for many, it was not the beginning of a sustained recovery. That recovery may be several months away. The point is that the economic risks for the remaining Q4 20 data and for Q1 21, which just began, are on the downside.

If that is indeed the case, then why have bond yields risen? Is this another disconnect between Main Street and the House of Finance, like stocks rallying during the pandemic? It is darkest before dawn and whether it is four months or six months, the investors expect better news in the second half of the year. At the same time, there will be a new stimulus push in the US. The UK Chancellor of the Exchequer will have to extend aid as the lockdown is extended and intensified. It is likely Germany will have to, as well. Italy’s projected debt issuance is a third higher than it was a couple of weeks ago.

At least four Fed officials have said they could consider tapering before the end of the year. To be specific, the four are regional presidents, while the governors, including Powell and Clarida, have played this down. Currently, the Fed is buying $80 a month of Treasuries (about 55% have been notes of 4.5-years or less before maturing and about 13% in the 20-30 year bucket) and $40 bln a month in Agency mortgage-backed securities. No one is saying that tapering is imminent and a majority of officials that have spoken suggest it does not look particularly likely this year at all. That was also the thinking in last month’s primary dealer survey conducted by the Federal Reserve.

Yet if tapering is not the real culprit for the sharp rise in US yields this year, what is the driver? Where you begin your narrative points you in the direction of the answer, In one telling, the US 10-year yield has risen by around 45 bp since the election as investors discounted greater supply and became more committed to the reflation trade, which means higher real rates, and arguably a sensitivity for higher inflation. At the same time, the price of oil has surged.

The February WTI futures contract closed in October near $36.5. It approached $54 a barrel before profit-taking kicked-in ahead of the weekend. Recall that end of last January it was around $50.50. The deflationary thrust from oil prices has ended. Inflation expectations often track significant moves in oil prices.

Asian demand, including China’s apparent inventory accumulation, drove industrial metal prices higher at the end of last year. On the other hand, supply concerns following last week’s disappointing report on US plantings saw corn and soy prices rise to 6-7 year highs, and cotton traded at a two-year high. The CRB index has risen by over 22% since the end of October.

Even the coming Treasury supply may be exaggerated by partisans. The idea from both sides is that Biden will press ahead with the Democratic control of the legislative branch to push through the rest of the $3.2 trillion bill passed by the House of Representatives last year. However, we suspect it is more likely that Biden, judging from his disposition and that he learned from his experience with Obama, will avoid antagonizing the opposition and souring the relationship from the get-go. Instead, he is likely to find a compromise and make it bipartisan even if it results in a small package. In appointments and temperament, Biden is moderate.

Biden will be inaugurated on January 20. The day before, Yellen will speak at her confirmation hearings. In addition to broad economic issues, she will likely be asked about the dollar. As an economist, she recognizes that ideally one wants the currency to move in line with policy, otherwise it blunts or undermines it. At the Federal Reserve, she recognized that dollar policy is a Treasury remit. That makes it her call now.

The “strong dollar” mantra that existed before 2016 cannot simply be returned to now. A new formulation is needed to confirm that the US will not purposely seek to devalue the dollar to reduce its debt burden or for trade advantage. To signal a multilateral spirit, Yellen may be best served by reiterating the G7 and G20 stance that markets ought to determine exchange rates, that they should move in line with fundamentals, and avoid excess volatility. It does not have to be the final word, but as the first word, it would be reassuring.

Four G10 central banks meet in the coming days. The gamut of outcomes is likely, with the ECB, ironically, being the least perhaps the least interesting. Since it met on December 10, the pandemic has gotten worse and social restrictions and lockdowns have intensified and lengthened. The uncertainty of the US election and UK-EU trade negotiations has been resolved. Key hurdles to the EU’s budget and Recovery Fund were lifted.

The day before the last ECB meeting, the euro settled near $1.2080. It settled last week around $1.2150. March Brent was trading a little below $49 is rallied to almost $57.5 last week before consolidating. The 10-year German Bund yield has risen around 10 bp (to around minus 50 bp) and Italy’s premium has softened from almost 120 bp before the December meeting to almost 100 bp before widening again (115 bp) amid the political challenges in Rome. There is little for the ECB to do now.

The extension of the emergency in Japan to cover the area which generates more than half of the country’s output raises the downside risks. The central bank is likely to formally recognize this in one or two ways. It may shave its downgrade its qualitative assessment. It could also adjust its forecasts. In its last forecasts, issued in October, it anticipated the economy to contract 5.5% in the current fiscal year. Its previous forecast was for a 4.7% slump. The BOJ could also reduce the projection of growth for the next fiscal year, which was seen at 3.6%, up from 3.3% last July.

While peak monetary policy may generally be at hand, the Bank of Canada may be an exception. The overnight target rate sits at 25 bp. It is clear that officials do not want to adopt a negative rate, but Governor Macklem has suggested the lower bound for Canada maybe a little lower than where it is now but still above zero. Given the economic consequences of the spreading virus and some disappointing high-frequency data, the market (overnight index swaps) has a few basis points of easing discounted. It may not exactly be clear what a small rate cut achieves, but last year, the Bank of England and the Reserve Bank of Australia delivered small moves of 15 and 10 bp respectively.

Before this intensification of the virus, the Bank of Canada had seemed to be a candidate for an early exit from emergency policies. Now Norway’s Norges Bank appears at the front of the line. At its last meeting in the middle of December, the central bank brought forward its anticipated first hike to the first half of 2022. Since the December meeting, the high-frequency data points suggest that economic activity and prices are more resilient than feared.

The economy contracted by 0.9% in the three months through November. It was also half as bad as economists projecting. Underlying CPI, which adjusts for tax changes and excludes energy, rose by 3% year-over-year in December. The record drawdown from the sovereign wealth fund provided an early and strong fiscal cushion.

Two emerging market central banks of note meet as well next week. Turkey’s new central bank governor Agbal has made several steps that have given notice that there is a new economic regime. On Christmas Eve he delivered a 200 bp hike outstripping median forecasts for a 150 bp move. The one-week repo rate now stands at 17%. Inflation reached 14.6% last month.

Since the end of last October, the Turkish lira has been the strongest currency in the world, appreciating by about 13.4% against the US dollar. It is still off a little more than 19% since the end of 2019. Over the past three months, the yield on its 10-year dollar bond has fallen by about 105 bp to 5.60%. The market is signaling another rate hike is not needed.

The South African Reserve Bank can also stand pat, though for different reasons. SARB cannot afford to cut any further. Its repo rate is at 3.5% and December CPI stood at 3.2%. After cutting by 300 bp last year, the central bank held steady at the last two meetings of 2020. The implied policy path of SARB’s projections points to a rate hike in Q3 and Q4 this year., though we are a little skeptical that it can be delivered.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Dollar Strength, China Lockdowns Encourage Longs to Trim Positions

U.S. West Texas Intermediate and international-benchmark crude oil futures finished sharply lower on Friday as a stronger U.S. Dollar weighed on foreign demand for the dollar-denominated asset. Weak U.S.  economic data also raised concerns about domestic demand.

Meanwhile, U.S. Drillers continued to add rigs to take advantage of higher prices and OPEC+’s willingness to give up market share. Coronavirus lockdowns in China and U.S. stimulus concerns also pressured prices.

On Friday, March WTI crude oil futures settled at $52.42, down $1.20 or -2.24% and March Brent futures finished at $55.10, down $1.32 or -2.40%.

US Dollar Rises as Currency Markets Turn Risk-Averse

The U.S. Dollar rose and riskier assets fell on Friday, as President-elect Joe Biden rolled out a $1.9 trillion stimulus plan that was offset by fresh U.S.-China tensions and a rise in COVID-19 infections in China. The move helped the greenback post its biggest weekly gain since November 2020, with its recent recovery from three-year lows challenging the narrative of dollar bearishness for 2021.

A nearly two-month long break in the U.S. Dollar was one of the catalysts behind the huge surge in crude oil prices since late October, so it makes sense that a stronger dollar would be one of the factors encouraging bulls to trim long positions at current price levels.

Bearish Factors Piling Up

Besides the stronger U.S. Dollar, crude oil bulls were disturbed by weak U.S. economic data that could weigh on future demand. U.S. consumer sentiment came in below expectations in January and other economic data such as sluggish retail sales and producer prices also pointed toward the possibility of weaker demand especially for gasoline.

As the country faces obstacles related to rising coronavirus cases, President-elect Joe Biden said he will ask Congress for $1.9 trillion to fund immediate relief for the U.S. economy that has been devastated by the pandemic. However, traders reacted to this news with trepidation, questioning how easily Democrats will be able to get their proposals through the Senate. The large price tag and inclusion of initiatives opposed by many Republicans set up the relief package for a drawn out battle in the Senate.

US Drillers Add Oil and Gas Rigs for 8th Week in a Row – Baker Hughes

U.S. energy firms last week added oil and natural gas rigs for an eighth week in a row as crude prices recover to their highest in nearly a year.

The oil and gas rig count, an early indicator of future output, rose 13 to 373 in the week to January 15, its highest since May, energy services firm Baker Hughes Co said in its closely followed report on Friday.

Those eight weeks of additions were the most since November when the rig count climbed for nine weeks in a row. Despite gains in recent months, that count was still 423 rigs, or 53%, below this time last year.

U.S. oil rigs rose 12 to 287 this week, their highest since May, while gas rigs gained one to 85, their highest since April, Baker Hughes data showed.

Short-Term Outlook

Technical and fundamental factors could continue to weigh on prices next week, but all we are expecting is a short-term pullback. The size of the break will be determined by the strength of the U.S. Dollar and the extent of the spread of COVID-19 cases in China.

Long-term bulls will likely welcome a sell-off into a value zone since crude oil prices are a little ahead of the fundamentals. Prices are trading at levels not seen in a year, but demand remains well below pre-pandemic levels.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – U.S Politics, Monetary Policy, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 73 stats in focus in the week ending 22nd January. In the week prior, 46 stats had been in focus.

For the Dollar:

It’s a quiet week ahead on the economic data front.

In a shortened week, there are no material stats to consider in the 1st half of the week.

Through Thursday, Philly FED Manufacturing PMI and weekly jobless claims figures are in focus.

With market attention to labor market conditions, expect the jobless claims to have the biggest impact. Another jump in jobless claims would likely weigh on riskier assets.

At the end of the week, prelim private sector PMI figures for January wrap things up.

Housing sector data also due out in the week will likely have a muted impact on the Dollar and risk sentiment.

The Dollar Spot Index ended the week up by 0.75% to 90.772.

For the EUR:

It’s a busy week ahead on the economic data front.

On Tuesday, January ZEW Economic Sentiment figures for Germany and the Eurozone kick things off.

Germany’s ZEW Economic Sentiment indicator will likely be the key driver.

The focus will then shift to January prelim private sector PMI numbers on Friday. France, Germany, and the Eurozone’s private sectors will be in the spotlight on.

Expect Germany’s manufacturing and the Eurozone’s composite to be the key drivers.

Finalized December inflation figures for member states and the Eurozone, also due out in the week, will likely have a muted impact on the EUR.

On the monetary policy front, the ECB is in action on Thursday. No moves are expected, leaving the press conference as the key driver. Questions on the economic outlook are likely as EU member states extend lockdown periods.

The EUR ended the week down by 1.11% to $1.2082.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. Key stats include December inflation and retail sales figures, CBI industrial trend orders, and prelim January private sector PMIs.

Expect the retail sales figures and services PMI, due out on Friday, to have the greatest influence.

Away from the economic calendar, COVID-19 news will also influence. Following the vaccine approvals, the markets will be looking for new COVID-19 cases to begin abating.

On the monetary policy front, BoE Governor is scheduled to speak on Wednesday.

The Pound ended the week up by 0.16% to $1.3590.

For the Loonie:

It’s a busy week ahead on the economic calendar.

Key stats include December inflation and November retail sales figures due out on Wednesday and Friday.

Other stats include housing stats, manufacturing and wholesale sales figures. We would expect these stats to have a muted impact on the Loonie, however.

On the monetary policy front, the BoC is in action on Wednesday. With the markets expecting the BoC to hold rates steady, the rate statement and press conference will be the key drivers.

From elsewhere, economic data from China and private sector PMIs from the Eurozone and the U.S will also influence.

Expect COVID-19 news updates and chatter from Capitol Hill to also provide direction.

The Loonie ended the week down by 0.24% to C$1.2732 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week on the economic data front.

Consumer sentiment figures for January are due out on Wednesday.

With consumer confidence key to fueling a pickup in consumer spending and an economic recovery, expect Aussie Dollar sensitivity to the numbers.

On Thursday, December employment figures will also provide direction ahead of retail sales figures on Friday.

Economic data from China and private sector PMI numbers from the U.S and the Eurozone will also influence.

COVID-19 news updates will remain a key driver in the week. however.

The Aussie Dollar ended the week down by 0.70% to $0.7703.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic calendar.

In the 1st half of the week, 4th quarter business confidence and electronic card retail sales figures are in focus on Tuesday.

At the end of the week, Business PMI and 4th quarter inflation figures wrap things up.

Expect business confidence, retail sales, and 4th quarter inflation figures to be the key drivers.

The Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Japanese Yen:

It is a busy week ahead.

Finalized November industrial production figures get things going on Monday.

On Thursday, December trade figures will draw plenty of attention. With the COVID-19 pandemic continuing to wreak havoc, weak numbers could test market risk appetite.

At the end of the week, December inflation figures and prelim private sector PMIs for January wrap things up. The PMI numbers should have greater influence at the end of the week.

On the monetary policy front, the BoJ is in action on Thursday.

The Japanese Yen ended the week up by 0.09% to ¥103.85 against the U.S Dollar.

Out of China

It’s also a busy week ahead.

December industrial production and 4th quarter GDP numbers are due out on Monday. These will be the key stats of the week.

Other stats include fixed asset investment, retail sales, and unemployment figures. Barring dire numbers, however, these stats should have limited impact on market risk sentiment.

On Wednesday, the PBoC is also in action. However, the markets are not expecting any moves.

The Chinese Yuan ended the week down by 0.10% to CNY6.4809 against the U.S Dollar.

Geo-Politics

U.S Politics

It’s a busy week on Capitol Hill.

Inauguration Day and Trump’s impeachment will draw interest.

COVID-19

Vaccination rates and availability of vaccines will be key areas of interest.

An upward trend in vaccination rates and a downward trend on infection rates would support optimism towards an economic recovery.

Corporate Earnings

A number of big names deliver results in the week ahead.

From the U.S

These include:

Bank of America (Tues)

Goldman Sachs Group (Tues),

Netflix (Tues)

United Airlines (Wed)

Morgan Stanley (Wed)

Intel Corp. (Thurs).

The Weekly Wrap – COVID-19, Economic Data, and U.S Stimulus Weigh on Riskier Assets

The Stats

It was a relatively busy week on the economic calendar, in the week ending 15th January.

A total of 46 stats were monitored, following 61 stats from the week prior.

Of the 46 stats, 21 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 8 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 23 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive weekly gain, with the Dollar Spot Index rising by 0.75% to $90.772. In the previous week, the Dollar had risen 0.18% to 90.098.

Out of the U.S

It was a relatively busy week on the economic data front.

It was a quiet 1st half of the week, however, with stats limited to JOLTs job openings and inflation figures.

While job openings fell in November, inflation held steady, with the annual rate of core inflation holding at 1.6%.

Consumer prices rose by 0.4%, month-on-month, while core consumer prices increased by a modest 0.1%.

In a busy 2nd half of the week, key stats included the weekly jobless claims, retail sales, and consumer sentiment figures.

Jobless claims figure disappointed on Thursday, with initial jobless claims jumping from 784k to 965k.

In December, core retail sales slid by 1.4%, with retail sales falling by 0.7%, both following on from declines in November.

Consumer sentiment figures also disappointed.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 80.7 to 79.2.

The downside was limited, however, supported by COVID-19 vaccines and hopes of a bipartisan shift.

The survey noted that the fall was minor when considering the sharp rise in COVID-19 related deaths, insurrection, and Trump’s impeachment.

Other stats included industrial production, NY Empire State Manufacturing, and business inventory figures. These stats had limited impact on the markets, however.

On the monetary policy front, FED Chair Powell assured the markets that rates were not going up any time soon. The FED Chair also stated that there would be no tapering of bond purchases near-term.

In the equity markets, the NASDAQ and the S&P500 slid by 1.54% and by 1.48% respectively. The Dow fell by a more modest 0.91%.

Out of the UK

It was a relatively busy week on the economic data front.

Monday through Thursday economic data was limited to BRC retail sales and RICS house price figures.

Retail sales rose by a further 4.8% in December, following a 7.7% rise in November according to the BRC.

House prices were also on an upward trend, with the RICS house price balance coming in at 65%. While down marginally from October’s 66%, upward pressure on house prices is expected to remain.

At the end of the week, industrial and manufacturing production and GDP figures were in focus.

In November, industrial production fell by 0.1%, following a 1.1% rise in October. Manufacturing production rose by 0.7%, following a 1.6% increase in October. Both fell short of forecasts.

GDP figures were not much better. In November, the economy contracted by 2.6% reversing 0.4% growth from October. On a 3-month rolling basis, the economy grew by 4.1%, slowing from a 10.2% to October.

Trade data released on Friday had a muted impact on the Pound, however. In November, the trade deficit widened from £13.29bn to £16.01bn, with the non-EU deficit widening from £5.82bn to £8.01bn.

Away from the economic calendar, a pickup in vaccination rates in the UK offset the negative sentiment towards lockdown measures.

In the week, the Pound rose by 0.16% to $1.3590. In the week prior, the Pound had fallen by 0.76% to $1.3568. A 0.72% slide on Friday pared some of the gains from earlier in the week.

The FTSE100 ended the week down by 2.00%, partially reversing a 6.39% gain from the previous week.

Out of the Eurozone

It was a relatively quiet week on the economic data front.

Industrial production and trade figures for the Eurozone, together with full year GDP numbers for Germany were in focus.

It was a mixed set of numbers for the EUR and the European majors.

For the Eurozone, industrial production jumped by 2.5% in November, following a 2.3% increase in October.

Trade data disappointed, however, with the trade surplus narrowing from €30.0bn to €25.8bn in November. Weak numbers were expected, however, following Germany’s trade data from last week.

While economic data from Germany has been impressive of late, GDP figures disappointed.

For the full year 2020, the economy contracted by 5.0%, following 0.6% growth in 2019. Economists had forecasted a 5.1% fall, however, which limited the damage.

ECB President Lagarde had spoken the day before the release of the GDP numbers. Lagarde continued to stand by the ECB’s economic forecasts, in spite of the extended lockdown measures in the EU. Lagarde pointed out that the forecasts had factored in lockdowns through the 1st quarter.

At the end of the week, finalized inflation figures for France and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB’s monetary policy meeting minutes also failed to move the dial in the week.

For the week, the EUR slid by 1.11% to $1.2082. In the week prior, the EUR had risen by 0.02% to $1.2218.

For the European major indexes, it was a bearish week. The EuroStoxx600 fell by 0.81%, with the CAC40 and DAX30 sliding by 1.67% and 1.86% respectively.

A continued spike in new COVID-19 cases weighed. Across the EU, member states were reporting particularly low vaccination rates that added to the negative mood.

For the Loonie

It was a particularly quiet week on the economic data front. There were no material stats to provide the Loonie with direction.

At the start of the week, the BoC’s Business Outlook Survey failed to move the dial.

Market optimism, fueled by expectations of a sizeable U.S stimulus package, had supported crude oil prices and the Loonie.

A Friday sell-off, however, left the Loonie in the red. Concerns over the COVID-19 pandemic and market reaction to the Biden stimulus package weighed on riskier assets.

In the week ending 15th January, the Loonie fell by 0.24% to C$1.2732. In the week prior, the Loonie had risen by 0.2% to C$1.2702.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, following solid gains from the previous week.

In the week ending 15th January the Aussie Dollar fell by 0.70% to $0.7703, with the Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Aussie Dollar

It was a quiet week on the economic calendar.

November retail sales, building permit, and new home loan figures were in focus in the week.

Retail sales impressed in November, supported by an easing of containment measures in Victoria. Sales jumped by 7.1%, following a 1.4% rise in October.

Building permits rose by 2.6%, following a 3.3% increase in October, with new home loans surging by 5.5%.

Home loans hit a record high mid-way through the 4th quarter.

From elsewhere, trade data from China also provided support, with imports and exports on the rise in December.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was a relatively quiet week on the economic calendar. Core machinery orders were in focus in the week.

Month-on-month, orders rose by 1.5% in November, following October’s 17.1% surge. Economists had forecast a 6.2% slide. Year-on-year, orders were down by 11.3%, after having risen by 2.8% in October. Economists had forecast a more severe 15.4% slump.

The stats ultimately had a muted impact on the Japanese Yen, however. COVID-19 news and chatter from Capitol Hill remained key drivers in the week.

The Japanese Yen rose by 0.09% to ¥103.85 against the U.S Dollar. In the week prior, the Yen had fallen by 0.72% to ¥103.94.

Out of China

Inflation and trade data for December were in focus.

The stats were skewed to the positive, supporting riskier assets in the week.

Inflationary pressures returned at the end of the year, with consumer prices rising by 0.7%, month-on-month. In November, consumer prices had fallen by 0.6%. As a result, consumer prices were up by 0.2% year-on-year, partially reversing a 0.5% decline from November.

Wholesale deflationary pressures also eased at the end of the year.

Trade data was more impressive, however, with exports surging by 19.1% following a 21.1% jump in November. Imports increased by 6.5%, leading to a widening in the USD trade surplus from $75.4bn to $78.16bn.

While the stats were positive, a spike in new COVID-19 cases in China was a concern in the week.

In the week ending 15th January, the Chinese Yuan fell by 0.10% to CNY6.4809. In the week prior, the Yuan had risen by 0.81% to CNY6.4746.

The CSI300 slipped by 0.68%, while the Hang Seng ended the week up by 2.50%.

Crude Oil Price Update – Minor Trend Turns Down as Traders Eye $50.63 Target

U.S. West Texas Intermediate crude oil futures are under pressure late Friday as mounting coronavirus cases globally raised demand concerns, although this week’s drawdown in U.S. crude stocks limited losses along with Saudi Arabia’s promise to cut output by a million barrels per day in February and March.

At 20:02 GMT, March WTI crude oil futures are trading $52.36, down $1.26 or -2.35%.

In other news, U.S. energy firms this week added oil and natural gas rigs for an eighth week in a row as crude prices recover to their highest in nearly a year. The oil and gas rig count, an early indicator of future output, rose 13 to 373 in the week to January 15, its highest since May, energy services firm Baker Hughes Co said in its closely followed report on Friday.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of a closing price reversal top on Wednesday.

A trade through $53.94 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $47.31.

The minor trend is down. It turned down when sellers took out $52.30 earlier today. The move confirmed the shift in momentum to down.

The minor range is $53.94 to $51.89. Its 50% level at $52.92 is potential resistance.

The short-term range is $47.31 to $53.94. Its 50% level at $50.63 is the nearest downside target and potential support. Since the main trend is up, buyers could come in on a test of this level.

Short-Term Outlook

The direction of the March WTI crude oil futures contract into the close will be determined by trader reaction to $52.92.

Bearish Scenario

A sustained move under $52.92 will indicate the presence of sellers. If the selling is strong enough to take out the intraday low at $51.89 then look for a possible extension of the move into $50.63.

Bullish Scenario

Recovering $52.92 will signal the presence of buyers. If this move is able to generate enough upside momentum then look for a test of $53.94.

For a look at all of today’s economic events, check out our economic calendar.