The International Energy Agency (IEA) slashed its global oil demand outlook for 2021, as a result of a resurgence in coronavirus infections and reiterated lockdown measures.
Fundamental analysis: Slashed global demand outlook
According to the updated outlook, the agency expects global oil demand to increase by 5.5 million barrels per day to 96.6 million this year, representing a cut of 0.3 million barrels from last month’s forecast, following a massive drop of 8.8 million barrels per day in 2020 amid the pandemic.
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The revision in the outlook comes as countries across the world continue to impose restrictions to curb the spread of the deadly virus, with some of them even bringing back lockdowns in Europe and China.
IEA added the oil demand growth is expected to drop in the first quarter of 2021 as a result of new travel restrictions.
Consequently, worldwide mobility will be limited once again, urging the agency to slash its Q1 oil demand growth outlook to 94.1 million barrels per day. This means oil demand would move closer to year-ago levels, representing a downward revision of 0.6 million barrels from the previous report in December.
“The global vaccine roll-out is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020′s unprecedented collapse,” the IEA said in a report.
Technical analysis: Gains capped by 200-DMA
Crude oil prices are trading about 1.8% higher today around the $53.00 mark. Today’s move higher has stopped near $53.18, where the 200-DMA is located to provide nearby resistance.
Crude Oil weekly chart (TradingView)
A break of this resistance line will allow for a push towards the major resistance block located around the $55.00 handle. This trend line (the blue line) used to act as a support for oil traders for 4 years before the pandemic-related selloff yielded a break.
The IEA revised its global oil demand outlook, trimming it by 0.3 million barrels from December’s report. The agency now expects global oil demand to bounce back by 5.5 million barrels per day to 96.6 million this year.