Greater Upside Pressure for Oil as US Returns to Lockdown

WikiFX News (20 Nov.) - On Thursday, several regions in the US went back to lockdown amid the worsening pandemic, dragging the DXY down to 92.0. WTI crude has temporarily found some stability at $41.30 but will see further upside pressure in the short term.

Thursday's data showed that COVID-19-related hospitalizations in the US soared 50% in the past 14 days, the highest number since the pandemic's start. Although several regions have returned to lockdown, the federal government does not appear likely to adopt more shutdowns as Biden said he did not think there would be a need for such a nationwide lockdown.

Markets are betting on the Fed's large-scale asset purchases amid the policy uncertainties and worsening pandemic. As a result, Wall Street equity indices ended slightly higher, while WTI crude is temporarily constructive at $41.30.

With that said, however, markets' risk sentiment will soon be dampened once the Fed launches more fiscal stimulus, which will put greater upside pressure on oil in the short term. Besides, more-than-expected jobless claims last week has fueled worries about the country's economic outlook, hampering the demand for crude oil.

Oil prices are struggling with $41.30 and may find resistance in the short-term uptrend or repeatedly test the $40.0 level. A breach below $39.30 in the near future could pull oil back to $37.50.

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Chart: Trend of Oil Prices