Oil Tries To Settle Above The $49 Level

Oil Video 18.12.20.

Oil Stays Strong Ahead Of The Weekend

Oil continues to move higher and is currently trying to settle above the $49 level. Yesterday, I noted that hopes for a new round of U.S. stimulus and weak dollar served as bullish catalysts for oil.

Today, oil traders cheer the recent news on Moderna‘s COVID-19 vaccine which received endorsement from FDA advisory committee. Thus, Moderna will likely get an emergency use authorization from FDA as early as next week, and the U.S. will begin to distribute the second coronavirus vaccine. Moderna also expects that it will be able to ship its vaccine to Europe in early 2021.

Vaccine optimism remains the main pillar of the current rally. Europe and U.S. are experiencing the biggest problems with the virus right now but they will also be the first ones to implement mass vaccination.

The first results from mass vaccination will be visible after a few months, but financial markets always focus on the future rather than the past so oil may continue to move higher.

In addition, oil is supported by strong demand from Asia which helped to soften the blow from the second wave of lockdowns in Europe. Meanwhile, oil traders should continue to monitor the situation in Europe closely as some officials have started to talk about the possibility of a third wave of lockdows.

UK Prime Minister Boris Johnson Does Not Rule Out A Third National Lockdown

While the current mood in the oil market is bullish, UK may become a source of bearish news in the next week. UK and EU continue to negotiate the Brexit deal, and it remains to be seen whether they will be able to reach a compromise deal. A no-deal Brexit will likely send shockwaves across markets and put pressure on various assets including oil.

UK Prime Minister Boris Johnson has recently suggested that a third national lockdown could be needed right after Christmas as the number of new coronavirus cases continued to increase. Yesterday, UK reported the world’s third biggest number of new cases behind U.S. and Brazil.  The situation is also challenging in Germany, France and Italy.

While Asian economies continue to rebound, it remains to be seen whether they will be able to offset the potential blow from the third wave of lockdowns in Europe. In my opinion, this is the biggest risk for the oil rally right now.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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