Crude oil prices hit 8-month highs on improving risk sentiment
- Crude oil prices have gained in November on positive vaccine news
- Oil investors are waiting for the next OPEC+ meeting, which is scheduled for next week
- The next target for oil buyers is a psychologically-important level of $50
Crude oil prices are trading at the highest levels since March on positive news related to Covid-19 vaccine and diminishing concerns over weak demand next year.
Fundamental analysis: Improving risk sentiment
Crude oil prices gained on the announcements from three major drugmakers including Pfizer-BioNTech, Moderna and Oxford that the coronavirus vaccine rollouts could begin in December.
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“Despite a number of strong fundamentals rallying the markets, especially vaccine development supporting oil, bearish concerns remain,” said Avtar Sandu, senior commodities manager at Phillip Futures.
Sandu cited various risk factors for the buyers including the reintroduction of lockdown measures amid the second wave, increasing number of rigs employed in the U.S. as well as elevated output in Libya.
Oil stockpiles in America dropped by 754,000 barrels a week ago, as opposed to Reuters poll predictions that projected a 120,000 barrel increase. Moreover, stockpiles at the Cushing, Oklahoma, WTI’s delivery point, plummeted by 1.7 million barrels.
Oil investors are waiting for the next OPEC+ meeting, which is scheduled for next week. OPEC+, consisting of OPEC member states and Russia, agreed to hold informal talks tomorrow ahead of the official meeting next week.
Investors expect OPEC to offer support or at least maintain the current balance. Reuters reported yesterday that OPEC+ is likely to delay next year’s planned increase in oil output to support the market amid the rising number of Covid-19 infections.
“This increase in prices is about sentiment, but we need to extend to have solid market fundamentals to support the prices. So far, the best choice is the three-month extension,” a source told Reuters.
Technical analysis: A much-awaited break takes place
Crude oil prices finally managed to break above the resistance line sitting just below the $44 handle as buyers attempt to push prices higher in hopes of a recovery in the oil market.
The next target for oil traders is $50 followed by an ascending trend line that now trades around the $54 mark. Any pullback to $43.50/$44.00 is likely to be perceived as a chance to get on the long side.
Crude oil prices are trading at multi-month highs near the $45 handle ahead of next week’s OPEC+ meeting.