Crude Oil Consolidates After Reaching 13-Month High

WTI crude oil (live chart) reached its highest levels since January of 2020 in Monday trading, but pulled back to close the day lower. News of COVID-19 vaccine rollouts and the $1.9 trillion US stimulus package boosted crude oil over the past week, as optimism over economic recovery crept into the market.

In addition, crude oil has been underpinned by tightening supply amid OPEC+ production cuts and expectations of declining US crude oil production in 2021. The unusually cold weather in Texas and Oklahoma currently could also impact US production.

Russian Deputy Prime Minister Alexander Novak stated that the global oil market is on a recovery path and oil prices could average $45-$60 a barrel this year. Speaking with Rossiya 1 TV channel, he said: “We’ve seen low volatility in the past few months. This means the market is balanced and the prices we are seeing today are in line with the market situation.”

Meanwhile, US President Biden’s $1.9 trillion stimulus plan won support from Republican leaders nationwide, despite being opposed by senate Republicans. On Sunday, White House Press Secretary Jen Psaki said that President Biden would discuss the proposed $1,400 stimulus checks this week during his first official trip as president.

The broad ‘risk on’ sentiment at the start of the week has benefited commodities and risk sensitive currencies. AUD/USD and NZD/USD are nearing multi-year highs, while the oil correlated USD/CAD pair is nearing multi-year lows.

Looking at the crude oil daily chart above we can see that something of a shooting star pattern has formed and that RSI is in overbought territory and signaling declining momentum. Markets look to tomorrow’s US Retail Sales data and Australia’s employment report on Thursday.