MCX Crude Oil Almost Hit Full Target 3553 to 3608 on fire. U.S. West Texas Intermediate and international-Benchmark Brent crude oil futures inched higher on its last day of trading before the Christmas holiday, helped by a surge in late-day buying in a well-below average volume session to finish out the week.
February WTI crude oil settled at $48.30, up $0.07 or +0.15% and February Brent crude oil finished at $51.37, up $0.08 or +0.16%. For the week, WTI was down 2.05% and Brent moved lower by 1.89%. The lower close brought to an end the markets’ seven week winning streak.
The market started out higher, building on gains as Britain and the European Union reached a post-Brexit trade deal. Early buyers took profits on the U.S. regular session opening, but then the market rebounded later in the holiday-shortened session to end modestly higher.
WTI and Brent crude oil futures have rallied sharply since late October as traders shrugged off the surge in worldwide coronavirus cases, choosing instead to focus on the rollout of vaccines that has started in numerous countries. Nonetheless, globally, infections are still increasing, and investors’ outlook will be clouded by the pandemic for several months.
On a positive note, “by clinching a Brexit deal, Britain avoids a chaotic departure from one of the world’s biggest trading blocs, a move many investors warned would have sparked further volatility in financial markets,” Reuters said.
Andrew Lipow, president of Lipow Oil Associates, in Houston, Texas added, “While the Brexit deal is supportive, the impact of COVID is the dominant driver in the oil market. The market is waiting for the wider distribution of vaccines to get the public back on the road and in the air.”
There are new headwinds appearing that could have a negative impact on prices over the short-term or at least slow the price advance. New strains of the coronavirus, which appear to spread the disease more quickly, have hit the United Kingdom, Nigeria, and other countries.
At least four drugmakers expect their COVID-10 vaccines will be effective against the new fast-spreading variant of the virus that is raging in Britain, and are performing tests that should provide confirmation in a few weeks, according to Reuters.
Higher Close on Thursday, but Crude Oil Never Recovered from Monday’s Big Loss
Crude oil prices plunged at the start of the week as a mutant variant of the coronavirus in Britain revived concerns over demand recovery. Despite the rollout of vaccines, the move served as a reminder that the road to a return to normal life will be rocky.
Although a bullish Energy Information Administration (EIA) on Wednesday, coupled with the U.S. fiscal stimulus news and the Brexit deal helped underpin prices and bring in new buyers, bullish traders did not have the volume to erase Monday’s steep sell-off.
This is because the new coronavirus strain has shut down much of Britain and led to tighter restrictions in Europe, raising concerns over a slower recovery in fuel demand. New mobility restrictions across Europe will lead to a drop in European oil demand.
More countries closed their borders to Britain on Monday, causing travel chaos and raising the prospect of U.K. food shortages. Additionally, the new virus strain has already been detected in other countries, including Australia, the Netherlands and Italy.
Over the weekend, there were reports that the United States and China were considering travel bans. If they follow-through with their plans then crude oil demand will take another hit.