The market is looking forward to a new round of positive signals and today’s oil price uptick has a lot to do with US developments.
As we are approaching the beginning of the Biden administration era in the US, traders now have their hopes up for a rapid positive effect on markets coming from the promised stimulus package.
However, it’s not all politics that helped prices shine today. A lack of oil shipments from Saudi Arabia has been relieving American refineries from load pressure and stored crude is being drawn instead.
As more and more crude is taken off inventories weekly, the storage burden that has been pestering the market since 2020 is slowly getting lighter and lighter.
Traders are already pricing in an expected draw in inventories for last week, with first indications of how stocks moved expected on Wednesday.
Despite a positive sentiment today, not all is bullish in the market.
It takes spring for flowers to blossom and it looks like coincidentally it will also take spring for oil demand to take the next step towards recovering.
Vaccination campaigns need to speed up to continue seeing a positive effect on oil prices. December’s euphoria is already priced in and now the market waits for actual results.
Prices in coming days will depend a lot on how China deals with its rising Covid-19 infections. Should it manages to constrain the recent outbreaks and block a second wave, we will see a positive effect on oil.
If China, similarly to Europe, fails to stop the virus’ spread, more lockdowns will harm demand despite the country posting positive economic indicators for the end of 2020.
