During Thursday’s Asian trading session, the WTI crude oil prices failed to extend the previous day’s modest gains. They remained depressed at around the $40.68 level, while representing declines on the day, mainly due to the risk-aversion market sentiment. However, the risk-off market sentiment was backed by the ruthless spread of the coronavirus, which caused the optimism about the economic reopening to fade continuously, contributing to the oil losses.

On the other hand, the oil price declines could also be associated with the bearish EIA report. The geopolitical tension between the US and the rest of the global economies, like the European Union (EU), the UK and China, also exerted some downside pressure on risk-tone, keeping crude oil prices lower. Currently, WTI crude oil is trading at $40.76, consolidating in the range between 40.68 – 40.99. On the economic data front, the US crude inventories soared by 5.7 in the week of July 3, compared to expectations of a decrease of 3.1 million barrels.

The long-lasting pandemic continues to reduce the oil demand from some of the biggest oil consumers. As per the latest report, the cases in the US crossed the 3.0 million mark, with over 60,000 new cases within a month. The Texas Health Department also reported an increase of 9,979 new cases, raising the total number to 220,564 on Wednesday, the biggest daily increase since the start of the pandemic. The Australian state of Victoria also reported a lower figure of 134, compared to 191 on the previous day. Moreover, China offered positive vibes regarding virus cases, maintaining its zero virus case level, which helped the equity market to limit its losses.

Considering the critical situation regarding the virus, the World Health Organization (WHO) has strengthened claims of the possibility of airborne transmission of the COVID-19 virus, which means that the coronavirus could create a new wave of infections that would be very difficult to control, compared to the previous one.

Consequently, the risk-off market sentiment was further bolstered by the release of Chinese data, reporting a continued deflation in factory-gate prices. China’s producer price index (PPI), which measures costs for goods at the factory gate, dropped by 3.7% year-on-year in June, versus an increase to -3.2%, compared to May’s figures of -3.7%. Meanwhile, China’s consumer price index (CPI), a main gauge of inflation, also decreased by 0.1% month-on-month in June, missing the expected rise to 0% from -0.8%. However, this data report also weighs on the global equity markets, triggering a flight to safety.

Despite the ever-increasing numbers of COVID-19 cases and the possibility of renewed lockdowns in most of the nations, the broad-based US dollar failed to gain any positive traction, edging lower on the day, although, the losses in the US dollar kept a check on any additional losses in oil prices, as the price of oil is inversely related to the price of the US dollar.

Previously, on Wednesday, the US oil prices increased on the back of a US Energy Information Administration report. The EIA reported a drop in US gasoline stockpiles by 4.8 million barrels last week, which is much more than the analysts’ expectations of 8.8 million barrels per day (BPD), which was the highest since March 20.

Looking forward, the market traders will look forward to the Consumer Price Index (CPI) and Producer Price Index (PPI) from Beijing for the month of June. This data will offer immediate clues ahead of the US weekly jobless claims. Lastly, the traders will keep their eyes on the virus updates and news concerning China. Good luck!