• WTI is currently trading above a key area of support in the $70.00 region and its 200DMA at $70.37.
  • Prices are down about 50 cents on the day, with market commentators citing concerns about the impact of Omicron.

Front-month WTI futures are currently trading above a key area of support in the $70.00 region, a psychologically important level that also coincides with WTI’s 200-day moving average (which resides at $70.37). In recent trade, WTI dipped under the $70.00 level and the 200DMA to print session lows in the $69.70s, but has since bounced back above the big figure and into the mid-$70.00s. On the day, WTI’s losses currently stand at just over 50 cents, taking losses on the week to about $1.50.

Market commentators have been citing concerns about the impact of Omicron on the global demand outlook as weighing on sentiment in the energy complex in wake of recent Covid-19 restriction tightening across Europe. There is also focus on China, health authorities in the Tainjin region picked up the country’s first Omicron case on Monday, whilst the Zhejiang province, a key manufacturing hub, is said to be fighting its first major Covid-19 cluster of the year. China, one of the world’s major oil consumers, maintains a zero-Covid-19 policy which will be put to the test by Omicron, which is slated to be multiple times more transmissible than the previously dominant delta variant.

The IEA and OPEC released their monthly oil market reports this week. The former warned on Tuesday that Omicron is set to hit the global recovery and, as a result, revised lower their expectations for oil demand growth in 2021 and 2022 by 100K barrels per day due to new travel curbs. That contrasted to the more upbeat tone of the OPEC monthly report, which revised higher its expectations for demand in Q1 2022 and said Omicron would only have a mild, brief impact. Thus, market participants expect the group to agree to press ahead with another 400K barrel per day output hike from February next when they meet at the start of January.

Looking ahead for oil markets, weekly private US inventories will be out at 2130GMT on Tuesday ahead of Wednesday’s official US inventory report at 1530GMT. Oil markets will be focused on the broader macroeconomic story this week, the major moment being the Fed’s policy announcement at 1900GMT on Wednesday. The US economy is experiencing significantly higher inflation pressures that the Fed anticipated just a few months ago (case in point was Tuesday’s much hotter than expected PPI report which briefly weighed on oil prices) and markets expect a hawkish pivot.

This article was originally published by Fxstreet.com.Read the original article here.

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