Oil recovers, but falls nearly 7% on week as ‘One-Way Trade’ broken by Investing.com

By Barani Krishnan

Investing.com – Oil prices rebounded significantly on Friday after the previous session fell, helped by weaker bond yields, the dollar’s retreat from its highs and the downward oil purchase.

But a loss of almost 7% in the week has destroyed the myth of the indestructible rise in oil since October, indicating further disadvantages and greater volatility.

On the New York Stock Exchange, the benchmark for US oil, ended the day’s trading up $ 1.42, or 2.4%, to $ 61.42, retracing part of the Thursday’s 7.1% drop. -market.

The London market, a global benchmark for oil, ended Friday’s trading with a rise of $ 1.25, or 2%, to $ 64.53, after the 7% drop in the previous session.

But for the week, WTI fell 6.4%, while Brent lost 6.8%.

It was the biggest drop for both benchmarks since the week ended on October 23rd.

In the past nearly five months, oil prices had risen mainly in one direction – upwards – after OPEC + production cuts, falling crude oil stocks in developed countries and the promise of an economic reopening of COVID-19. From about $ 36 a barrel in late October, WTI rose to nearly $ 68 a week last week.

What was almost completely overlooked was the anemic demand for fuel for airplanes and other means of transport, as global travel continued to be severely limited by the pandemic.

Europe’s constant struggle with new outbreaks of infection, the alarmingly slow rate of vaccinations and new blockages have also been treated with little seriousness – until Thursday’s fall.

Although the settlement in the previous session seemed exaggerated by a perfect storm of negativity – which included ramps to 13-month highs of 1.7% and almost 92 – it proved that it can happen again.

“The magic of so-called one-way trading has been broken,” said John Kilduff, a founding partner of Again Capital, a New York-based energy hedge fund. “There is a readjustment of expectations now, and below $ 60 WTI it is possible again if the market moves ahead, without supporting data.”

The positive side of oil on Friday was the decline in bond yields and the dollar’s retreat from session highs, along with the United States administering its 100 millionth COVID-19 vaccine and the approval given by Europe’s drug regulator for the Oxford-AstraZeneca dose of at least a dozen countries in the bloc have stopped using for security reasons.

But working against these positive aspects was a third wave of infections in Europe and increasing blockages in places like Italy.

The arrival of the US refineries’ maintenance season, which could increase oil stocks in the country, and the possibility of greater oil production in Libya and a still sanctioned Iran may also offset some of the upward sentiment delivered for months by cuts OPEC +.

Technical charts also indicated that there could be more volatility ahead.

“Other advantages for WTI are subject to reaching $ 63.10,” said Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India. “If you don’t, you risk falling below the recent $ 58.23.”