Oil traders weigh if COVID-19 support programs will buoy economic growth

Oil prices were mixed at the second trading session of the week. Oil traders are cautiously optimistic that further COVID-19 stimulus programs will buoy economic growth against the increasing COVID-19-induced lockdowns sighted in key international markets.

What you should know

At press time, Brent oil crude futures gained 0.40% to trade at $54.95, while West Texas Intermediate futures dropped by 0.23% to trade at $52.30 a barrel. There was no oil settlement transaction on Monday at the world’s largest economy, due to public holiday.

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• Both global oil benchmarks remained above the $50 mark.
• In addition, oil traders are treading cautiously on reports that the third-largest crude oil importer, India, recorded poor fuel sales in 2020, as well as rising numbers of COVID-19 cases in Japan and China.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, dropped valuable points as regards macros weighing the black liquid hydrocarbon, taking to account the U.S dollar recorded losses at Tuesday trading session, thereby arbitrarily supporting crude oil prices.

• “Many COVID-19 jitters out here, but oil prices continue to hold and looks to nudge higher eyeing support from the weaker US dollar as oil sensitive currencies are showing the way. The US data has been less encouraging lately. However, yesterday’s Q4 China GDP data provided a festive reminder that China’s economy continues to fire on all cylinders and brought with it dip-buying support.
• “Overall, the policy mixes between OPEC+ current supply discipline coalescing with the Biden’s administration’s overarching focus on public health and economic responses to the COVID-19 pandemic, suggest oil prices can go much higher.”

READ: Non-oil sector is critical to Nigeria’s economic recovery in 2021 – Cordros Capital

What to expect

Oil traders anticipate that oil prices will stabilize near the current level, as progress is made on the COVID-19 vaccine roll-out. As the black liquid hydrocarbon moves closer on the path to a typical demand environment, oil prices will then soar.