Crude Oil bubbles to 13-month highs

18 Feb 2021

In this edition of Market Bites, we will analyse the reasons for Crude Oil to bubble to 13-month highs and share where prices may head to from here. Read on to learn more.

Key factors for the surge in prices
The crude oil market typically trades on expectations ahead, instead of the present factors affecting market, and this has been the primary reason for the sharp rally in oil prices in recent weeks. The current surge in crude oil to 13-month highs of above $60 a barrel was supported by a cold snap that shut wells in the biggest U.S. producing state of Texas. Texas is home to 31 refineries. The surge in price was further aggravated by Middle East supply concerns after the Saudi-led coalition had destroyed an explosive-laden drone fired at the kingdom by the Houthi group in Yemen. 

The global rollout of vaccinations has supported expectations of a recovery in the global economy and has also kept oil prices buoyant. Another key factor has been Saudi Arabia’s pledge of extra supply cuts in February and March.  

What is likely to happen next?
A joint ministerial OPEC+ Committee (JMMC) meets in the first week of each month to review OPEC+ quotas and assess whether to tweak the then OPEC+ oil deal agreement. Traders and investors should closely watch the outcome and changes recommended by JMMC. 

The recovery in demand will outstrip rising production in the second half of the year to prompt “a rapid stock draw” of the crude inventories since the outbreak of the coronavirus. However, drilling and the number of new rigs in the shale oil producing areas of America have steadily risen in recent months and these may halt the current re-balancing that OPEC+ is attempting. 

Technical analysis for CFD Spot Brent Crude Oil (UKOIL)

Daily CFD Spot Brent Crude Oil (UKOIL)

Crude oil prices have rallied at a very fast pace, appreciating 30%, since November 2020. Prices seem severely overbought on the technical charts and are due for a pullback. Though, fundamental drivers are pointing to further appreciation of prices, there is potential for prices to go either way in the near term. The mid-term outlook though, is bullish.

The near term target on the downside is $50 a barrel, minor support lies at $54 a barrel. Top side prices may move up to $70 a barrel.

Capture opportunities in Crude Oil

Phillip Futures offers the following Crude Oil products:

Phillip MT5

CFD Spot Brent Crude Oil (UKOIL)
CFD Spot WTI Crude Oil (USOIL)

Phillip Nova

To request a Phillip MT5/Nova demo, please click here. Use MyInfo to open a Rubber Futures trading account online in minutes, click here.

Should you have any other Crude Oil trading related query, you may contact the Client Service Team at futures@phillip.com.sg / (65) 6538 0500.

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A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

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2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

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