During Tuesday’s Asian trading session, the WTI crude oil prices took modest bids above the 40.00 level, but remained trapped in the narrow trading range of past three weeks. However, the modest bullish bias in crude oil could be attributed to the risk-on market sentiment, backed by the positive results from three potential COVID-19 vaccine candidates, while upcoming stimulus measures, from both the US and Europe, also boosted the risk sentiment, contributing to the oil gains. The weakness of the broad-based US dollar, triggered by the upbeat market mood, also impressed oil bulls, keeping the oil prices bullish. 

On the other hand, the geopolitical tensions between the US and China became a key factor that capped further gains in oil prices. At the press time, WTI crude oil was trading at 41.03 and consolidating between 40.74 and 41.06. The US West Texas Intermediate (WTI) crude (CLc1) futures rose by 0.15% to $ 41.05.

The positive tone around the global equity markets undermined demand for the safe-haven US dollar and extended some support to the oil prices. However, the risk-on market sentiment was supported by the success of the coronavirus vaccine. The British drug-maker AstraZeneca (LON: AZN) and Oxford University said on Monday that their COVID-19 vaccine induced an immune response in all the study participants, each of whom received two doses.

At the same time, two other separate vaccines are being developed by Cansino Biologics (HK:6185), alongside China’s military research unit, and the German biotec hcompany, BioNTech (NASDAQ: BNTX) together with US drug-maker Pfizer (NYSE:NYSE: PFE), both of which are showing promise.

Moreover, the upbeat market sentiment could be associated with the hopes for a fiscal rescue package in Europe and the US, bolstered by the promise of a coronavirus vaccine. Moreover, the risk-on market sentiment was further bolstered by the positive reports regarding the receding coronavirus numbers in the US.

The European Union (EU) leaders indicated agreement to a possible € 1.8 trillion ($ 2.06 trillion) coronavirus spending plan, which is meant to reverse the coronavirus-induced slump in the European economies. This news boosted the risk-on market sentiment and strengthened the bid tone surrounding riskier assets. An additional boost on the risk sentiment was derived from discussions for a second stimulus package in the US, and this also exerted pressure on the safe-haven US dollar. 

As a result, the broad-based US dollar failed to gain any positive traction and edged lower. However, the losses in the US dollar could be attributed to the uptick in the US stock futures. The losses in the US kept the oil prices higher, as the price of oil is inversely related to the price of the US dollar. The US Dollar Index, which tracks the greenback against a basket of other currencies, fell by 0.16%, to 95.623, by 10:09 AM ET (3:09 AM GMT).

On the coronavirus front, the latest coronavirus (COVID-19) numbers from Texas and LA County showed a mild reduction in the infection figures, compared to the recent high statistics. While both added 10,564 new cases on Monday, Texas remained the worst affected state, with 7,404 additional infections, pushing the total for the state up to 332,434. On the flip side, there is a total of 159,045 cases in LA County, with the latest number of new cases at 3,160.

Regarding the worsening relations between the world’s two top economies, the US policymakers are considering imposing a travel ban on all members of the Chinese Communist Party. As per the White House Chief of Staff, Mark Meadows, the Trump administration is studying national security risks from TikTok, WeChat, and other apps that allow a foreign adversary to gather information on users. These statements kept the traders cautious, capping the further upside in the risk-on market sentiment. Moreover, the oil price gains were further bolstered by the latest announcement that China had decided to reopen some cinemas, after a six-month closure, raising hopes of a recovery from the pandemic that is holding in the world’s second-largest economy – where the outbreak of the virus began – in check.

As we all know, there is no significant data in the European/UK session on the day, which will keep the market slightly ahead. However, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum. Finally, traders will keep their eyes on the virus updates and news concerning China. Good luck!