All this week, oil’s intraday dynamics have seen a weak start in Asia and a slump in trading in Europe, replaced by an increase in buying when US traders get in on the action.
By the start of the regular session in New York, Brent crude had reached $75.4, temporarily climbing to $75.70, within arm’s length of the December highs area.
Even more tellingly, oil’s dip under the 200-day moving average at the start of the week attracted buyers and did not cause an intensification of the sell-off.
Last year, in October-November, a similar sell-off below the 200 SMA triggered a new momentum that buyers supported based on optimism on the news about the arrival of the vaccines.
Now, comparatively optimistic reports that omicron is less likely to lead to hospitalisation. The UK and US governments have opted not to impose severe lockdowns nor stop international air travel, are acting as a driver for Crude prices as a year ago.
Such news forms the necessary positive backdrop for oil, suggesting a recovery in demand. At the same time, supply growth is held back by a host of factors, from Exxon Mobil refinery accidents and supply disruptions in the Middle East to industry underinvestment in the US and UK and self-restraint from OPEC+.
If the world does not face overcrowded hospitals early next year and avoids new waves of lockdown, oil is well placed on returning to above $80, laying the foundations for a trading range of $85-$100 for next year.
