Crude oil rose from $38.85 to the highest of the prior week $40.70 a barrel and traded in range of $39-$40.70 a barrel on Monday this week on optimism that a deal could still be struck for a fresh round of stimulus spending before the U.S election.

The market also drew some support from U.S. stocks which rallied after four weeks of declines, as well as a weaker dollar which makes commodities priced in the greenback more attractive. Yet concerns over the pandemic haven’t gone away and gains were limited by the prospect of renewed lockdown measures to combat the virus.

Oil’s recovery from an unprecedented crash earlier this year has slowed with signs of a resurgent pandemic. Global Covid-19 cases topped 33 million as New York is seeing an uptick in cases and a U.K. health minister refused to rule out more restrictions. On the stimulus front, House Speaker Nancy Pelosi held out the prospect that a deal could still get done, even though she said the White House will have to agree to “much more” spending.

“A weaker dollar, a boost in U.S. equities, thoughts that there might be a deal, those are all positive things behind crude oil,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. Still, “some kind of uptick in demand is needed.”

Supply concerns have also been weighing on the outlook for crude prices. JPMorgan analysts warned against adding oil to the market, as Libya production returns and the OPEC+ alliance looks to its next round of tapering output cuts.

Trade Recommendation:

As expected market still trade in supply and demand zone ($38.85 – $41.45)

Buy option:

Entry at $38.85 – $39.50

Stop-loss at $38

Take profit at $40- $41

Sell option:

Entry at $41- $41.50

Stop-loss at $42

Take profit at $38 – $39

Analyzed by: Mr. Nhim Kosol,Independent Analyst