WTI bulls in control as futures burst above $52.00 level

Front-month WTI crude oil futures have seen significant upside in recent trade and burst above the $52.00 level for the first time since 24 February. No specific news or theme is behind the recent rise, and the complex has been largely immune to the stronger US dollar (which would typically be seen as a negative) and was unaffected by a brief wobble in US stock markets earlier on in the session that saw the S&P 500 briefly drop back from record-high levels and into the red below 3800 (the S&P 500 has since recovered back above 3800).

Factors supporting oil this week

Various factors have been supporting crude oil markets this week including 1) the Democrats surprise victory in the Senate election in Georgia that gives them control over the Senate and opens the door for significant further US fiscal stimulus, which will boost crude oil demand and 2) a voluntary cut by the Saudi Arabians of 1M barrels per day in the months of February and March to ensure that, as much of the Northern Hemisphere locks down (and reduces fuel consumptions), oil markets don’t become oversupplied.

More broadly, expectations for a rise in inflation as the global economy vaccinates itself against, and recovers from the impact of, the Covid-19 pandemic and amid the follow-through from all the stimulus (fiscal and monetary) that was unleashed in 2020 are also boosting crude oil prices.

Some analysts are also pointing to colder than expected weather in North Asia which is causing a larger than expected drawdown in distillate stocks, also contributing to the upside in the oil complex. Demand has also been a little stronger in the US than expected as of late, as shown by this week’s inventory data (EIA inventories dropped 8M barrels), indicating that the impact of the recent rise in Covid-19 cases and subsequent lockdowns hasn’t hurt demand as much as feared.

Long-term WTI bulls eyeing move to 2019 highs

Now that WTI crude oil has re-entered a $50.50-$65.00ish range that prevailed for most of 2019, the longer-term WTI bulls will be eyeing an eventual move back towards the 2019 highs above $65.00. To the downside, the bottom of this range ought, of course, to offer decent support.

WTI weekly chart