Crude oil prices are currently trading at the overbought position and are susceptible to profit-taking after the recent macros show that the death toll from the COVID-19 onslaught had so far killed almost 500,000 Americans.
The pandemic has also rendered millions of people jobless throughout the world. It has made many oil traders paint a dark cloud picture on energy demand as they recover to the pre-coronavirus pandemic era.
That said, the oil bears seem to have not managed to dent the bulls’ gain recorded in 2021, as the dollar remained quite weakened in the general market spectrum. Eventually, it has supported commodity assets like crude oil.
Recent price action shows that oil bears are taking hold of the market at the $56 resistance level in the Brent crude market. This takeover by the bears reinforces the chances of continuing the decline for the rest of the week on the bias oil bulls appear to be out of steam. They might be in exhaustion, noting that breaking above the mentioned level may somehow keep the bulls on course in breaking the $60 resistance level.
Furthermore, the recent drop in oil indicates that both major oil contracts are now in the middle of their 2-week ranges, which means that they are now vulnerable to deeper corrections in case the health crisis gets out of control.
The Bears Come In
Additionally, the oil bears have, for now, taken some grip on the market, with the most recent data showing that the US crude oil stockpile bearishly gained 2.56 million against consensus draw. The macros also indicated that the world’s biggest crude oil importer’s demand prediction seems high and vulnerable to revision lower with lockdowns increasing around China ahead of the Lunar New Year.
Joe Biden, who is now the leader of the free world, recently pushed for a more extensive approach on the fiscal front. Nonetheless, the bears seem quite worried about the bias that the US President faces a major battle ahead with the high-ranking Republicans despite his party controlling both chambers of Congress.
It is still uncertain where oil will go next with the rollout of COVID-19 vaccines and the return of lockdowns to curb the health crisis. Will it go higher, or will it plunge to $45?