Those gains followed a strong end to 2020 with Covid-19 vaccine breakthroughs buoying the demand outlook, while OPEC and its allies agreed to keep curbing their output. Recent Democrat victories in U.S. elections have also spurred hopes of economic stimulus, while commodity index re-balancing was expected to buoy prices this week.
“The market has both fundamental and financial upward momentum, thanks to extra voluntary Saudi production cuts and a weak dollar outlook with Fed holding its present policy steady,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA.
There are signs that prices could be starting to get overheated though. WTI is now trading around its 200-week moving average, which is a signal “it may soon top out,” Commerzbank AG analysts wrote in a report. Both the U.S. benchmark and Brent have been trading in technically overbought territory too in recent days.
With prices climbing higher, a “big chunk” of U.S. shale production is now profitable, International Energy Agency Executive Director Fatih Birol said in a Bloomberg television interview, though he urged caution over oil’s long-term role in energy demand. WTI prices for 2022 are trading close to $49 a barrel on Tuesday, their highest level since February.
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