Oil futures jump above $42 on vaccine hopes and lower US stocks

Oil futures are rising more than 3% today at $42.60 per barrel as crude prices keep moving higher on vaccine hopes and lower United States stocks.

Futures of the West Texas Intermediate (WTI)– the United States standard– are trading above the $42 mark for the first time considering that 20 October, while Brent futures– the worldwide oil benchmark– are surging 4.6% up until now throughout the European commodity trading session at $44.9 per barrel.

Oil costs responded favorably to reports from American drugmaker Pfizer that pointed to a strong immune reaction seen in a little subset of patients during the company’s COVID-19 vaccine scientific trials, a development that sent the WTI marker surging practically 9% on Monday as futures traders now rely on that the vaccine could be readily available for distribution by the first quarter of 2021.

On the other hand, the uptrend continued yesterday and apparently today following a report from the American Petroleum Institute (API) that revealed a decrease in US oil inventories of 5.1 million barrels, which far exceeded experts’ expectations of 913,000 barrels.

That stated, the outlook for crude continues to be capped by lower gas need in industrialized countries, specifically from Europe and the United States, as the reintroduction of lockdowns and travel constraints can keep need levels lower for longer than anticipated.

In this regard, the National Australia Bank wrote in a note this Wednesday: “Near-term need potential customers remain weak– especially given a range of European nations carried out COVID-19 constraints (albeit to differing degrees) which will negatively impact intake”.

Experts from the Australian bank included: “Beyond these procedures, need will take a considerable time to recuperate– as international travel remains constrained”.

What’s next for oil futures?

WTI futures rate chart (CL1)– 4-hour candle lights see with RSI, MACD, and volume– Source: TradingView

WTI futures are rapidly approaching their post-pandemic highs of $43.8 per barrel today and could wind up retesting that level by the end of today’s session as vaccine hopes keep instilling positive sentiment towards the energy sector.

That said, oil still has a long way to go to recover to its pre-pandemic levels and the need from the business air travel sector is likely to stay low in the near future, which is perhaps capping how high oil can go during what stays of the year.

Although the hourly charts are already indicating a possibly overheated bull run, the rate action seen in the everyday chart is still not sending any warning signals as the RSI remains listed below overbought levels while the MACD has just sent a buy signal while relocating to favorable territory.

At this moment, oil traders could take some profits out of the 14% jump seen in the rate of crude in the past 3 days, potentially as soon as the price retests those August highs. However, the short-term possibility for oil stays bullish as vaccine hopes have shown to be a strong driver in previous celebrations.

If oil futures were to move above the $44 mark, the next stop could be $49 per barrel, as the possibility of a strong rebound in the demand for fossil fuels in 2021 keeps increasing.

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