ENB Publishers Note: Couldn’t quite reach $53 before dollar index turns south…
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Singapore — 0321 GMT: Crude oil futures were lower during mid-morning trade in Asia Jan. 11, as oil, along with the other commodities, were weighed down by the firming US dollar, even as market sentiment remained generally positive.
At 11:21 am Singapore time (0321 GMT), the ICE Brent March contract was down 60 cents/b (1.07%) from the Jan. 8 settle at $55.39/b, while the February NYMEX light sweet crude contract was down 34 cents/b (0.65%) to $51.90/b.
Both markers had risen by 8.09% and 7.67% to settle at $55.99/b and $52.24/b, respectively, in the week ended Jan. 8, as Saudi Arabia’s 1 million b/d cut and expectations of additional fiscal stimulus in the US had buoyed the oil market.
Following the positive developments last week, sentiment in the oil market remained generally positive this morning as well, but analysts noted that an appreciation of the US dollar has pushed oil down prices.
“The US dollar settled higher on Friday for the third day in a row, and was rising this morning as well, and this has led to a slide in prices across the commodities complex,” Vandana Hari, CEO of Vanda Insights, told S&P Global Platts Jan. 11.
Hari, however, along with other analysts, noted that the mood remains bullish, as the market is expecting generous stimulus measures from the US’ President-elect Joe Biden, who plans to lay out his proposals for fiscal relief on Jan. 14.
In the medium term, the market also expects the Biden administration, with the support of the Democrat-controlled Congress, to push through a green legislative agenda, and the prospect of increased restrictions on oil companies has also been supportive for oil.
“The Biden administration, now with support from a Democrat-controlled Senate, may be more likely to impose restrictions on US oil companies, [such as restrictions on] drilling activity on Federal land, which limits the medium-term production upside from the US and therefore diminishes one of the key downside risk factors for oil,” Stephen Innes, Axi’s chief global market strategist, said in a Jan. 11 note.
Meanwhile, the market seemed unconcerned by the worsening COVID-19 situation in Europe and the US, and by the recent fresh outbreaks in Asia.
“While there have been some concerning developments on the pandemic-front, the indication from the past several weeks is that the oil market is looking past the pandemic progression to a possible amelioration of the situation brought about by vaccines,” Hari said.
Analysts, however, added that any reports proving that vaccines are ineffective against the new strains of the coronavirus could yet trigger another pandemic related sell-off.
