Yellen’s tone helped the market to shrug off the latest monthly report from the IEA
Oil prices regained upside impetus on Tuesday, staying positive today. Brent crude reclaimed the $56 as support but has encountered resistance around $56.50 and retreated marginally in recent trading. The futures remain within a strong uptrend amid a weaker dollar and expectations of further stimulus from the governments and central banks across the globe.
The greenback slipped from one-month highs yesterday, having extended losses on Wednesday as traders digest Yellen’s speech. The treasury secretary nominee said that despite debt implications, the benefits of big spending outweigh the risks. She also called the lawmakers to act big on the next coronavirus relief package. Against this backdrop, the dollar came under broad-based selling pressure while risky assets rose, sending oil prices higher.
Of note, Yellen’s tone helped the market to shrug off the latest monthly report from the IEA. The International Energy Agency on Tuesday cut its 2021 global oil demand forecast, citing soaring coronavirus cases and renewed lockdown measures. The agency now expects world oil demand to recover by 5.5 million barrels per day to 96.6 million this year, a downward revision of 0.3 million barrels from last month’s assessment.
Later today, both the EIA and the API reveal their weekly reports. If inventory figures disappoint, Brent crude could correct lower amid profit-taking. In this scenario, the futures would easily slip back below $56, shifting market focus back to the $54.50 support zone. If the prices manage to retain a bullish tone, traders could push the futures to $57. However, the market will likely need the additional positive driver to break above the $56.50 intermediate resistance.
In the longer term, oil prices remain within a broader uptrend that could continue amid positive vaccination and stimulus developments, as well as upbeat economic data. Otherwise, a major correction may take place in the medium term.