WTI Crude Oil Fails to Stop Bearish Run – Oversupply Fears in Focus
Arslan Butt • 2 min read
During Friday’s Asian trading session, the WTI crude oil prices failed to halt the previous day’s losing streak, remaining depressed under the $39.00 level, while representing significant losses on the day, mainly due to the risk-aversion market sentiment. However, the risk-off market sentiment was backed by the relentless spread of the coronavirus, which caused continuous fading of the optimism about the economic reopening.
On the other hand, the reason behind the declines in the oil prices could also be associated with the geopolitical tension between the US and the rest of the global economies, like the European Union (EU), the UK and China, which also exerted some downside pressure on the risk-tone and kept crude oil prices lower. At the moment, crude oil is trading at $38.86 and consolidating in the range between $38.84 and $39.79.
However, the long-lasting pandemic continued 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, reporting over 60,000 cases on Thursday. Furthermore, over 12.2 million cases and 550,000 deaths were reported globally as of July 10, as per John Hopkins University data. Many states, like Florida, Texas and California, reported a record-high number of new cases on Thursday. According to Goldman Sachs, hospital capacity in Arizona, Texas and Florida has been filled up with COVID-19 patients, and state officials are forced to consider additional measures.
As a result, if lockdown restrictions were to be re-imposed, the drop in US fuel consumption would once again raise concerns about the weakened demand, which may put an additional burden on the oil prices. Furthermore, China offered positive vibes regarding virus cases, managing to maintain its zero virus case level, which helped to limit losses in the equity market.
Apart from the virus woes, the tussle between China and the US, the UK and India remained on the cards. The diplomatic relations between Australia and China, over the Hong Kong issue, also favored the risk-off mood. On the USD front, the broad-based US dollar extended its early-day bullish moves, remaining well bid as investors turned to the safe-haven after the US saw a record daily number of new COVID-19 cases. However, the US dollar gains also kept the oil prices under pressure, due to an inverse relationship with the US dollar. Meanwhile, the US Dollar Index, which tracks the greenback against a basket of other currencies, gained 0.13%, rising to 96.802 by 10:06 AM ET (3:06 AM GMT).
In the absence of the major data/events to be released on the day, traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum for the crude oil. Good luck!