WTI eyes test of recent double top highs under $54.00 as markets looks for Yellen driven reflation boost

Crude oil markets trade on the front foot on Tuesday amid a broad recovery in the market’s appetite for risk, as traders eye incoming US Treasury Secretary Janet Yellen’s testimony for Congress for more impetus behind the recent inflation trade. So far, Yellen is expected to heavily endorse incoming US President Joe Biden’s proposed $1.9T stimulus package, is not expected to signal too much concern regarding the US’ growing mountain of debt and is also expected to indicate that the government will be taking a hand-off approach to USD exchange rates.

WTI trades just to the south of the $53.00 handle, up about 60 cents or a little over 1% on the day, with a break above the psychological level opening the gates to another test of recent highs in the $53.80s. A break above this double top area of resistance would open the door to a resumption in the gradual grind back towards the $60s, in line with the bullish forecasts that have been made by many institutions in recent weeks. 

Downbeat IEA forecasts fail to dampen bullish oil market sentiment

The International Energy Agency’s monthly oil market report this morning was downbeat, but failed to deliver any meaningful dent to bullish oil market sentiment; the agency downgraded its forecast for Q1 oil demand growth by a chunky 600K barrels per day, a reflection of resurgent Covid-19 cases and associated lockdowns in major economies. The agency reduced its demand growth for the full year of 2021 by 300K barrels per day. The third of the major monthly oil market reports chimed with the monthly Short-Term Energy Outlook report released last week, that also downgraded its forecast for oil demand growth in 2021.