The WTI crude oil prices extended their earlier losses, dropping further below the $41 level, representing total losses of 0.40%. This is mainly due to the global oil producers, who showed a willingness to ease output cuts. The strength of the broad-based US dollar, backed by renewed Sino-American tension, also weighed on the crude oil price. However, hopes for a swift US demand pick-up after a significant drawdown from the country’s crude stocks became a critical factor that kept a lid on any additional losses in the quote, at least for now. The optimism about the near breakthrough in terms of a coronavirus vaccine overshadowed the fears of ever-increasing coronavirus numbers and kept the traders confident.

Elsewhere, the fears of geopolitical tensions between the US and the rest of the global economies. like the European Union (EU), the UK and China, also challenged the upside movement of crude oil. At the moment, WTI crude oil is trading at $40.81 and consolidating between 40.73 – 41.17.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to ease oil production cuts by two million barrels per day from August, as the global economy slowly recovers from the coronavirus pandemic. The oil producers expect a recovery in demand from 2021, which is the basis for their production hike. Details suggest that OPEC+ has been cutting output by 9.7 million barrels per day or 10% of the global supply, since May, but from August, cuts will officially decrease to 7.7 million BPD until December.

Apart from this, the crude oil losses could also be attributed to the mixed readings from the dragon nation. China’s GDP and Industrial Production failed to satisfy market players about upbeat oil demand from the world’s largest commodity user as Retail Sales marked uneven growth of China.

On the other hand, the oil traders failed to properly cheer Wednesday’s official inventory data from the Energy Information Administration (EIA), which estimated an 8.322 million-barrel draw for the week ending July 10. The draw was bigger than the analysts’ forecast of 2.1 million barrels, reversing the previous week’s 2 million-barrel build. The US crude inventories dropped by 8.3 million barrels in the week of July 10, beating analysts’ expectations for a decline of 2.1 million barrels.

On the US-China front, the tussle between these two nations took a breather earlier, after US President Donald Trump personally avoided imposing further sanctions against Chinese entities involved in implementing Hong Kong’s national security laws, stating that he does not want to further escalate tensions with China. Despite this, the tensions remain on the cards, as China is still threatening to retaliate, because the US has imposed sanctions on diplomats from Beijing, and they signed an executive order ending preferential treatment for Hong Kong on Wednesday.

On the USD front, the broad-based US dollar did not pay any major heed to the news of success regarding a coronavirus vaccine, and took bids on the day, possibly due to the worsening situation of ever-increasing coronavirus numbers and an ongoing tussle between the US and China, which exerted some downside pressure on the S&P 500 futures. Although, at the same time, the gains in the US dollar kept the oil prices lower, as the price of oil is inversely related to the price of the US dollar. Whereas, the US Dollar Index, which tracks the greenback against a basket of other currencies, gained 0.01%, rising to 96.032, by 10:12 PM ET (3:12 AM GMT).

Looking forward, the market traders are waiting on the US economic docket, which will show the release of Retail Sales m/m, Philly Fed Manufacturing Index, Unemployment Claims and Business Inventories m/m, which could play a key role in influencing the intraday momentum. At the same time, the updates concerning China-US relations are not likely to lose their importance. Good luck!