WTI consolidates below $ 53.50, just below annual highs

• Crude oil is trading higher on Wednesday, although they have been unable to take advantage of a recent improvement in risk appetite.
• WTI is trading just below $ 53.50, having failed in a previous attempt to climb to recent yearly highs.
• The imposition of more economic restrictions in Europe has been a somewhat daunting sentiment.

Crude Oil Markets Trade Higher Wednesday, although they have failed to take advantage of a recent improvement in risk appetite that has caused a rise in the US stock markets and the fall of the US dollar since the opening of the American session, particularly against commodities. At the time of writing, the WTI is trading just below the $ 53.50 level, having failed a previous attempt to test or exceed the recent yearly highs at $ 53.80 and $ 53.90.. However, the US benchmark for light sweet crude is still up 0.7% or more than 40 cents on the day. Looking ahead, crude oil will continue to track the markets’ broader risk appetite sentiment, focusing on the inauguration of US President-elect Joe Biden for more clues about the fiscal stimulus, in addition to the release of private inventory data, which is released a day later than usual due to the Monday holiday in the USA (Martin Luther King Day).

Risk appetite on the upside

Markets have maintained their optimistic bias on Tuesday for the second day, with a strong injection of risk appetite coming into play in the American session. US equity markets, industrial metals, and precious metals have skyrocketed as the US dollar falls. A more optimistic rate decision than anticipated by the Bank of Canada appears to have been the trigger (with the strength of the CAD apparently leading to strength in other currencies and risk assets).

While the most recent move in the CAD in the wake of the BoC might have been the initial catalyst for the recent surge in risk appetite, it is certainly not the main cause. Analysts continue to point to testimony before the US Senate Finance Committee Tuesday from US Secretary of the Treasury candidate Janet Yellen, where the former Fed chair urged Congress to act big on fiscal stimulus and worry about debt later, as expected. The markets seemed to like his tone regarding how pandemic relief should come first and tax increases (mainly for the wealthy and corporations) should come second. Expectations appear to be that the Fed will continue to absorb all of this additional public debt issuance in the secondary market., as evidenced by how nominal returns have barely budged in recent days, while real returns have fallen and inflation expectations have risen.

But crude is struggling to make additional profits

As noted above, WTI has recently failed to rally in line with US equity markets. The imposition of more Economic restrictions in Europe have somewhat weakened sentiment towards the oil market crude and probably preventing WTI from rising above the $ 54.00 level on Wednesday. The German Chancellor, Angela Merkel, formally announced stricter lockdowns on Tuesday evening (European time), while the Prime Minister of the Netherlands introduced a new curfew that will come into effect from Friday, along with a ban on all flights outside the Schengen area as of 23 from January. Concerns regarding outbreaks in the US and China also persist (29 million people are currently under lockdown in China), which had been largely virus-free for most of the past six months and had helped fuel the economic recovery in the second half of 2020.

However, the news on vaccines has been good. The WHO plans to approve several vaccines for Covid-19 from Western and Chinese manufacturers in the coming weeks and months.Reuters reported citing an internal document, while pointing to speedy implementations in poorer countries. As far as developed markets that are already in an advanced phase of their mass vaccination efforts are concerned, this should be viewed as a positive, given that the faster the international community joins in to reduce global Covid-19 numbers by as much as the less scope possible the virus will have to mutate and potentially make current vaccines less effective.

WTI technical levels