Oil price rose as much as 10% on Friday, driven by large short covering, hopes of further stimulus from European Central Bank (ECB) and a severe snowstorm hitting US that led to freezing temperature in Northern hemisphere.
A massive snowstorm hit US East Coast, which dumped as much as 20 inches of snow in Washington. Demand for heating oil is suddenly to spike up, due to this event. However, we at FxWirePro, believe, it is more of a sentimental move, rather than actual change in fundamental even in the short run. As the snowstorm might have increased demand for heating oil, people are likely to go out less, drive less which makes overall demand for crude at the same level. However, spread between heating oil and other byproducts might gain, that would be more suitable fundamental move.
Moreover, with summer approaching, we don't think, snowstorm could be a big game changer for crude. A week ago, short position in WTI reached record level, so the snowstorm and comments from Mario Draghi might have sparked big short covering and temporary change in sentiment.
With such happenings, possibility is that crude might move into further correction or consolidate. With our previous mentioned key resistance $32/barrel getting flushed away, next focus is $35/barrel.
However, fundamentals for crude is still not in the positive side.
WTI is currently trading at $32.5/barrel.
