Oil prices are extending losses on Tuesday, building on yesterday’s sell off as rising covid cases and tighter lockdown restrictions are hitting near term demand expectations and overshadowing the start of the covid vaccination programme in the UK.
California tightening lockdown restrictions on Monday, as well as stricter measures in Germany and South Korea is hitting demand sentiment. Particularly given that California is one of the largest road fuel demand states, so a lockdown lite there for Christmas doesn’t bode well for the demand outlook.
Last week oil surged on vaccine optimism and an OPEC+ agreement to hold back on oil production increases. However, the rally has stalled in the face of near term covid & economic headwinds which are building.
Attention will remain on US lawmakers and the chances of a new stimulus bill being agreed. Stimulus is needed to drive jobs growth and therefore energy demand.
American Petroleum Institute data due later and US official government data tomorrow is expected to show US stockpiles fell last week. A weaker than forecast reading could drag oil prices lower.
WTI trades -0.8% at $45.20, the price has slipped through its ascending trendline in place since early November. The price is also testing the 50 sma on 4-hour chart. A meaningful move through its current level and this support could open the door to support at $44.50, before $43.90 a confluence of 100 sma and swing low on Dec 2nd.
On the flip side should the 50 sma hold, as it has across most of November, WTI could look to move back above $46.70 ascending trend line prior to attacking its 8 month high.