- WTI is having a good end to the week, having risen to $ 57.00 on Friday.
- Higher stock prices, US bond yields and a lower US dollar are providing tailwinds for the oil space.
Previous month’s futures for the US benchmark for light sweet crude, West Texas Intermediary (o WTI), have continued to rise on the last trading day of the week. WTI even managed to break above the $ 57.00 level for the first time since last January on several occasions, although for now it seems content to consolidate just below this level, having rebounded from the Asia Pacific levels around $ 56.50.
Driving the day
The US markets are witnessing another day with an appetite for risk and hope to end up flourishing as it has been a very strong week; the S&P 500 is up another 0.3% and continues to move into record uncharted territory. US bond yields continue to advance, with 10-year yields above 1.15% and looking at a test of recent highs above 1.18% and the curve continues to steepen. Meanwhile, the US dollar has lagged behind since a disappointing overall US labor market report in January.
In terms of correlations, at least, this is a very positive scenario for crude oil markets, hence the gains seen in crude oil markets on the last trading day of the week. The pessimistic US data is being ignored, in large part because, if anything, it will only serve to reinforce in the minds of US politicians that economic conditions must remain ultra accommodative. In other words, slow data is putting pressure on fiscal policymakers to enact more spending measures (US President Joe Biden has already criticized the poor data, saying that at this rate, there are 10 years to go until full employment) and those responsible for monetary policy to remain moderate.
Regarding fiscal policy; the news flow from the United States Congress this week has been positive. The Senate voted to initiate budget reconciliation procedures and the House is set to vote on this on Friday. This will clear the way for Democrats to push through significant sums of stimulus, even without Republican consent, although markets at this point are hoping Democrats won’t get Biden’s entire $ 1.9 trillion package enacted. The key here is that more stimulus will give a strong boost to US economic activity, significantly increasing demand for fuel.
Technical Levels
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