US West Texas Intermediate and international-benchmark crude oil futures eased sharply on Friday as the strong US dollar weighed on foreign demand for dollar-denominated assets. Weak US economic data also raised concerns about domestic demand.
Meanwhile, the U.S. Drillers continued to add rigs to take advantage of higher prices and OPEC’s willingness to relinquish market share. Coronavirus lockdown also pressured prices in China and US stimulus concerns. US dollar rises as money market rises. The US dollar rose on Friday and risky assets fell, as President-Elect Joe Biden launched a $ 1.9 trillion stimulus plan, offset by fresh US-China tensions and an increase in the COVID-19 transition in China.
The move helped give the greenback its largest weekly gain since November 2020, its recent recovery from three-year lows challenging the dollar’s recession story for 2021. The nearly two-month long break in the US dollar was one of the catalysts behind the surge in crude oil prices since late October, so it makes sense that a stronger dollar would allow bulls to trim longer positions in current times One of the encouraging factors will be. price level.
In addition to the strong US dollar, crude US bulls were troubled by weak US economic data that could weigh on future demand. US consumer sentiment fell short of expectations in January and other economic data such as sluggish retail sales and producer prices also pointed to weak demand, especially for gasoline. As the country faces hurdles related to growing coronovirus cases, President-Elect Joe Biden said he would ask Congress for $ 1.9 trillion to provide immediate relief for the destruction of the American economy. However, traders reacted sharply to the news, questioning whether Democrats would be able to easily get their proposals through the Senate. The inclusion of large price tags and initiatives opposed by many Republicans led to the establishment of a relief package for the fight in the Senate.
American drillers add oil and gas rigs for 8th week in a row – Baker Hughes Last week, US energy companies added oil and natural gas leaks for the eighth consecutive week as crude oil prices hit their highest in nearly a year. The oil and gas rig count, an early indicator of future production, rose from 15 to 373 in the week to 15 January, its highest since May, energy services firm Baker Hughes Company said in its report on Friday. Those eight weeks of additions were the highest since November when the rig count lasted nine consecutive weeks.
Despite gains in recent months, this count was still 423 rigs, or 53% below this time last year. US oil leaks rose from 12 to 287 this week, the highest since May, while gas rigs have increased from one to 85, their highest since April, Baker Hughes data showed. Short term outlook Technical and fundamental factors may continue to weigh on prices next week, but we are expecting this to be a short-term pullback. The size of the break will be determined by the strength of the US dollar and the extent of spread of COVID-19 cases in China. In the long run, bulls will likely welcome a sell-off in the price sector as crude oil prices are slightly ahead of fundamentals. Prices are trading at levels not seen in a year, but demand is far below pre-epidemic levels.