Brent crude remains vulnerable to fresh losses as coronavirus-related developments stay in focus
At the start of the week, oil prices briefly plunged to the $69,30 area to derail the $70 psychological level for the first time since December 3. At lower levels, Brent crude attracted buyers and staged a strong recovery towards the $74 figure that caps further gains so far.
Earlier on Wednesday, the futures advanced to local highs around $74,60 but failed to preserve gains and slipped back to the flat-line ahead of the European session. Overnight, the API data showed that US crude oil stockpiles fell by 3.7 million barrels last week versus the expected draw of 2.6 million barrels. Now, traders are shifting their focus to the official report from the EIA due later today.
Despite the recent bounce from three-week lows, Brent crude remains vulnerable to fresh losses as coronavirus-related developments stay in market focus, raising concerns over the outlook for global energy demand amid the spreading Omicron variant. On the positive side, the US Army has created a single vaccine that will be effective against every known variant. Meanwhile, Moderna’s COVID-19 booster has shown to increase neutralizing antibodies against the Omicron variant.
Depending on virus-related developments, oil prices could target either direction, but for now, it looks like traders will continue to sell the futures on rallies amid the intensifying uncertainty surrounding the outlook for the global economy and oil demand amid the pandemic.
From the technical point of view, the $70 remains in focus as the sellers could reenter the game at any point. However, should the prices finish the day above $75, the near-term outlook will improve further. Of note, thin trading conditions ahead of the Christmas holidays could bring more volatility to the market in the near term.