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WTI crude oil battles monthly resistance line after rising the most in over two weeks. The oil benchmark retreats to USD 71.22 during early Wednesday morning in Asia.
Crude oil benefited from the market’s optimism to overcome the virus-related fears. Though, the weekly industry inventory report by the American Petroleum Institute (API) couldn’t much help the buyers despite marking a surprise draw of -3.67M versus -0.815M figures for the week ended on December 17.
Global policymakers’ rejections to panic due to the latest spread of the Omicron, dubbed as the variant seemed to have favoured the sentiment, as well as oil prices.
Even as Texas reported the first Omicron-linked death in the US, President Joe Biden refrained from any national lockdowns while also pushing for faster vaccinations.
On the same line is cautious optimism from Pacific nations and the UK. News that the US Food and Drug Administration (FDA) is up for authorizing a pair of pills from Pfizer and Merck to treat Covid-19 as soon as this week also reinforced the risk-on mood.
Rising geopolitical tensions between the West and Russia, as well as with Iran, contribute to the outlook with hints at future challenges to the supply and, consequently favouring oil prices. However, the weekly Baker Hughes Rig Count data jumped to the early 2020 levels and challenged the same.
Looking forward, the official oil inventory data from the Energy Information Administration (EIA) of the US, expected -0.031M versus -4.584M prior, will be important for WTI traders.
Also, a slew of data including US Q3 GDP, Core Personal Consumption Expenditures for the third quarter and Chicago Fed National Activity Index will precede Existing Home Sales to direct short-term oil moves.
The monthly resistance line challenges WTI bulls around USD 71.50, a break of which will direct the bulls towards a 200-SMA level of USD 74.00. However, bullish MACD signals and an upbeat RSI line hint at further upside moves. Meanwhile, pullback moves may aim for the 100-SMA level of USD 69.83.
The data schedule will get busier on Wednesday and Thursday before the holiday on Friday. Looking ahead, Gross Domestic Product growth, Consumer Confidence and Existing Home Sales reports will be released on Wednesday. Personal income and spending, Initial Jobless Claims and New Home Sales releases are scheduled for Thursday.
Europe’s energy crisis got even worse after France declared severe nuclear outages and prices continued to balloon above Euro 300 MWh in almost every country on the continent.
Austria is second most expensive for electricity, with Euro 434.34 per MWh, followed by Belgium with Euro 432.99. Poland, whose electricity price was much lower than many other countries, saw its price spike by 110 percent in the last day to Euro 344.56 per MWh.
Europe’s electricity grids are already struggling with low wind speeds, meaning that wind turbines aren’t able to produce as much power.
On top of this, Russia has been reducing its natural gas flows to the continent, in an attempt to get the 759-mile Nord Stream 2 pipeline between Russia and Germany approved.
Inflation and supply chain issues caused by the pandemic saw energy prices soar this year, with European gas surging 600 percent, Bloomberg reported.
Analysts have warned that a potential conflict between Russia and Ukraine could raise prices further. Moscow has massed around 120,000 troops at the Ukrainian border, which U.S. officials fear will lead to the invasion of Ukraine early next year.
Europe is also planning to transition to a low carbon economy to meet the demands of the 2021 Glasgow Climate Agreement. But renewable energy sources such as wind and solar can be less reliable than fossil fuels, which may present some hiccups when transitioning the economy.
