During Friday’s European trading session, the WTI crude oil prices failed to extend earlier gains, dropping modestly below the $41 level, mainly due to the global oil producers’ willingness to ease output cuts. Meanwhile, the crude oil losses were further bolstered by growing uncertainty about global recovery in the fuel demand, as the number of new COVID-19 cases surged in several countries. 

Besides this, backed by hopes of success for the coronavirus vaccine, the weakness of the broad-based US dollar became a key event that kept a cap on any further losses in crude oil. Elsewhere, the fears of geopolitical tensions between the US and the rest of the global economies, such as the European Union (EU), the UK and China also weighed on crude oil. At the moment, WTI Crude Oil is trading at $40.70, consolidating in the range between 40.62 and 40.87.

The two benchmark contracts dropped 1% after 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 as of August. The decision to cut supplies was made as the global economy started to recover slowly from the coronavirus pandemic. Available information suggests that OPEC+ has been cutting the oil output by 9.7 million barrels per day, or 10% of global supply, since May, but come August, the production cuts will officially decrease to 7.7 million BPD, until December.

On the coronavirus front, the United States reported a new daily record of at least 75,000 new COVID-19 cases. Meanwhile, in Washington State, COVID-19 cases rose by 1,267 to 44,313 on Thursday, the highest single daily increase since the pandemic started. The total number of cases in Texas rose by 10,291 to 292,656 on Thursday. At the same time, the death toll increased by 129, to a total of 3,561, the highest single-day increase so far, and a record increase for the second day in a row. According to data from the Johns Hopkins University, the latest numbers indicate that more than 13.5 million people have been diagnosed with COVID-19 all over the world. This virus-related report has raised concerns among investors, that the virus is far from over, and these concerns have dampened hopes of economic recovery.

Apart from this, the crude oil losses can also be attributed to the full-fledged war that is still waging between the world’s top two economies, as the US policymakers are expected to levy heavy sanctions on members of China’s ruling party. This action will push the dragon nation towards rough retaliation, and these fears are weighing heavily on the risk-tone sentiment. As a result, the previous optimism, backed by the hopes of the virus vaccine, was unable to survive for long.

On the other hand, the oil traders suffered an additional burden after the dragon nation showed its willingness to fight the UK’s ban over Huawei. As we know, the China became the enemy of many western countries, after imposing new security laws in Hong Kong. However, Beijing refused to back down, keeping fears of a full-blown tussle on the table.  

On the positive side, the traders cheered the optimism concerning the COVID-19 vaccine, triggered after the upbeat signals form Moderna. Dr. Anthony Fauci, the leading expert on infectious diseases in the US, also hinted on Wednesday that the country would meet its goal regarding a COVID-19 vaccine by the end of the year, spurring hopes of an economic recovery. Apart from this, the scientists in the UK have also reported a breakthrough. A trial for a COVID-19 vaccine, which is being developed by researchers at Oxford University, with 5,000 volunteers, is currently underway in Brazil. The pharmaceutical company, AstraZeneca (LON: AZN), has also agreed to mass-produce the vaccine.

Despite the ever-increasing number of new coronavirus cases and the better-than-expected US macro releases, the broad-based US dollar failed to gain any positive traction, edging lower on the day. However, the losses in the US dollar could be attributed to the uptick in the US stock futures. The losses in the US dollar also helped crude oil to limit its deeper losses, as the price of oil is inversely related to the price of the US dollar. 

In the absence of the major data/events on the day, the market traders will keep their eyes on the USD price dynamics and the coronavirus headlines, both of which could play a key role in influencing the intraday momentum. Traders will keep their eyes on the virus updates and news concerning China. Good luck!