The crude oil price has advanced last week and closed near $60 resistance despite the fact that that IEA reported the market is still oversupplied. COVID-19 vaccines are expected to help demand recover but global consumption of petroleum and liquid fuels will rise less than expected in 2021.
Fundamental analysis: International Energy Agency reported the market is still oversupplied
The crude oil price has advanced on a weekly basis, although the International Energy Agency reported the market is still oversupplied. OPEC cut its demand forecast, and according to analysts, prices have moved too far ahead of underlying fundamentals.
“Current price levels are healthier than the actual market and entirely reliant on supply cuts, as demand still needs to recover,” Rystad Energy’s Bjornar Tonhaugen said. It is also important to mention that EIA expects lower oil prices due to rising oil supply that will slow the pace of global oil inventory withdrawals.
Global consumption of petroleum and liquid fuels will rise less than last month’s estimate, which could add pressure on the crude oil price. The global business activity is still under pressure as the whole world has been facing the COVID-19 crisis for almost a year.
On the other side, increasing vaccinations and the prospect that more government spending will drive higher growth keeps the market in a positive mood. Investors remain optimistic about the large U.S. stimulus package, and the U.S. crude’s relative strength index was at the most overbought level last week.
“There are some signs that the market is setting up for a pullback,” said Bob Yawger, director of energy futures at Mizuho Securities. Technically looking as long the crude oil price is above $50, there is no fear of the trend reversal.
