For the subsequent month or two we are going to in all probability proceed to see patrons soar in and choose up dips in commodities, oil included.
The West Texas Intermediate crude oil market rallied a bit throughout the buying and selling session on Tuesday as we proceed to see the “reflation commerce” come into play. This could favor crude oil, not less than for the brief time period, even if demand is lower than stellar. One of many predominant drivers is the concept because the economies open up, that ought to drive crude oil increased, not less than primarily based on demand.
From a elementary standpoint, Saudi Arabia has just lately self-imposed cuts that might proceed to push crude oil increased within the brief time period. Moreover, the US greenback has been falling and this can be a market that’s priced in these US {dollars}, so it’s going to take extra of these {dollars} to purchase a barrel. One other potential driver of upper oil costs is the truth that the US continues to see an total malaise in drillers leaping again into the markets, though one would suppose that if we get an excessive amount of increased to the upside, the drillers will come again en masse. If that’s going to be the case, you continue to have an argument for a short-term pop to the upside, however it’s only a matter of time earlier than we see sellers come again into the market.
If we will break above the $55 stage, then the market will in all probability go searching in direction of the $60 stage, which is much more resistive, so it is going to be much more troublesome to interrupt above there. Until we get a large growth this 12 months, the crude oil markets merely will be unable to maintain an enormous transfer to the upside. That is merely a reflexive commerce, and for the subsequent month or two we are going to in all probability proceed to see patrons soar in and choose up dips in commodities, oil included. If we do see a reversal of the foreign money markets, that could possibly be the primary signal that the commodity markets may get hit, as a result of it must see low cost US {dollars} as a way to strengthen from a long-term standpoint. I’ve little interest in shorting this market, not less than not but; however I definitely might be listening to a number of crosscurrents to see when it’s time to reverse.
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