Crude Oil Is Likely To Trade Firm

Crude oil is likely to trade firm 

Crude Oil prices are hovering around $52.5 per barrel. Economic growth concerns are likely to keep oil prices under pressure, after Germany cut its growth estimate for this year. US Crude oil inventory built-up is also likely to keep oil prices under pressure.

OPEC Secretary-General Barkindo has said that they are cautiously optimistic for the global economic rebound in 2021, and for significant oil demand growth. However, the pandemic situation remains "delicate," and OPEC+ "stands ready to take any necessary actions" through the OPEC+ alliance.

Rally in Crude oil is likely to be limited after the German government cut its 2021 GDP estimate to 3.0%, from an October estimate of 4.4%, and said that the German economy would return to pre-pandemic levels in mid-2022, six months later than an October projection.

Meanwhile, Iraq pledged to cut its crude output in January and February, to make up for overproducing, relative to its OPEC+ quota last year. Iraqi crude production could drop to 3.6 million bpd for January and February, which will be the lowest Iraqi crude output in six years.  A drop in Iraq oil production is likely to support oil prices.

Crude oil prices are likely to find support from increasing US Gasoline demand, which rose +1.2% in the week ending January 22, to 8.48 million bpd, the third consecutive weekly increase.

However, concerns about Chinese energy demand is negative for crude prices. The Chinese government is discouraging travel during the upcoming Lunar New Year holidays to prevent spread of Covid.

On the US inventory front, the EIA reported that crude inventories unexpectedly fell -9.9 million bbl, to a 9-3/4 month low, versus expectations of a +1.5 million bbl build. However, EIA gasoline stockpiles rose by +2.47 million bbl, to a 5-1/2 month high, against expectations for an increase of +1.30 million bbl. {{0|U.S.crude oil inventories, as of Jan. 22, were +5.7% above the seasonal 5-year average, gasoline inventories were -2.2% below the 5-year average, and  distillate inventories were +7.8% above the 5-year average.

WTI Crude oil prices for the March expiry contract are likely to find support near the 20-days EMA at $51.80 per barrel. Meanwhile, critical resistance is seen around $54.85 per barrel, and $56.13 per barrel.