From a fundamental perspective, the continuous fall in the U.S. oil inventories is driving market given the positive global growth narrative, Stephen Innes, Head of FX Trading for OANDA told Azernews.
The expert said that oil markets were at the epicenter of volatility with WTI breaking the $ 66.00 per barrel market and marking the highest close since December 2014.
“It’s conceivable we could top $70 on WTI, but of course, Baker Hughes delivering a convincing signal that we should expect more U.S. rigs to come back online the closer we get to $70 per barrel after BH reported that 12 new wells came back online,” Innes stressed.
“But let’s not lose sight of the U.S. dollar follies, which are underpropping oil markets and providing the bounce to all commodity markets,” he stressed.
The expert went on to say that since we may only be in the early stages of the U.S. dollars demise, and when aggregated with the oil markets OPEC induced positive developments, the market could press significantly higher from increasing sensitivity and stronger correlations to the U.S. dollar alone.
“Structurally, the dollar can push much lower as signs are developing that we may be in the early stages of a multi-year secular bear market,” Innes mentioned.
Traders continue to look over their shoulder at the likelihood of U.S. oil production ramps and supporting that argument; Baker Hughes reported the number of active U.S. rigs rose by 12 to 759.
Further, the expert noted that last week was ended by singing a very familiar tune with U.S. equities putting in another strong performance, helped by more positive corporate earnings reports, while the USD weakened further, as the market was still digesting the aftershocks from the verbal ping-pong match when both Mnuchin and Trump dabbled into the FX debate.
“We should expect more two-way uncertainty entering the fray this week which could make for some touch and go moments, but for now, the markets remain comfortable to maintain a longer-term soft USD bias,” Innes added.
Meanwhile, as of January 31, Brent crude futures are down 0.69 cents, or about 1 percent, at $68.33 a barrel, while U.S. West Texas Intermediate (WTI) futures are down, 67 cents, or 1 percent, at $63.83.