Oil prices recovered some losses from the last week, however considering the magnitude of the plunge, the rebound is likely technically-driven and should lose force soon. It is somewhat early to expect revival of the recent upside, since the last week’s fall was the deepest since October 2020 while fears of lockdown extensions in Europe due increasing Covid-19 positive rates dented confidence about oil demand growth.

The German Ministry of Health said on Friday that a third wave is imminent. The latest trade data shows that China pared down oil purchases while Iran boosted output despite sanctions. A bunch of other reports indicating sluggish demand recovery in the second quarter, including worrying OPEC demand growth projections hint that oil will likely enter consolidation phase for several weeks, until more encouraging vaccine-related news emerge, which should boost hopes for an early end of lockdowns and hence demand forecasts.

Baker Hughes data indicated that rig count increased by 9 units to 318 last week. The US drilling activity was disrupted in late February and early March due to low temperatures, but is gradually recovering, which also does not add optimism to the market.

An IEA report last week challenged hopes of the "supercycle" in the oil market, stating that even with OPEC's production caps, oil inventories are higher than the same period last year. In addition, significant OPEC capacities are idle and sooner or later they will be put into operation, which will limit price increases.

Technically, oil has fallen below the trendline that emerged in November 2020, making recovery difficult and increasing chances of consolidation:

US debt markets look stable on Monday, with 10-year yields retreating from highs. More stabilization is expected this week - economic releases for February are likely to reflect weakness in the month, while Powell and Yellen, who will speak on Tuesday and Wednesday, will be more cautious about US expansion, which expectations are pushing long-term rates higher, stoking equity market fears.

Fed spokesman Barkin encouraged investors in risk-assets last week saying that pent-up demand in the US will give a powerful impetus to growth as soon as the US fully reopens. Given that the US has boosted vaccine production significantly in the past month, towards the end of the second quarter, the US economic calendar may be full of positive developments related to consumer spending.

The British Ministry of Health reported that half of British adults have been vaccinated. The news boost chances that the UK will soon be done with lockdowns which in the current state of post-pandemic recovery is one of the key drivers of investors’ attention to local assets and hence national currency. With Europe struggling with the third wave, bearish trend in EURGBP initiated in 2021 is set to continue:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.