Crude Oil Continues Choppy Trading – COVID19 Hits Demand!
Arslan Butt • 2 min read
During Wednesday’s Asian trading session, the WTI Crude Oil failed to extend its modest overnight gains, stepping back from $ 42.00 to $ 41.00. However, the modest bearish bias in crude oil prices was reinforced after industry data showed a bigger-than-expected inventory build in the United States, where new coronavirus cases are still not showing any signs of slowing down. The surge in the number of COVID19 cases further dented the demands from the world’s biggest oil consumer.
On the other hand, the risk-on market sentiment, backed by the positive results from three potential COVID19 vaccine candidates, coupled with upcoming stimulus measures from both the US and Europe, also boosted the risk sentiment, making it a key factor that capped further losses in crude oil. The weakness of the broad-based US dollar, triggered by the upbeat market mood, also impressed oil bulls. At the press time, WTI Crude Oil is currently trading at 41.66 and consolidating in the range between 41.44 and 41.80.
On the data front, the industry group American Petroleum Institute (API) reported that US crude inventories rose by 7.5 million barrels last week, compared with expectations for a draw of 2.1 million. The positive tone surrounding 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 positive news that a COVID19 vaccine had been developed, with the Russian Defense Ministry has completed Phase 2 trials, leading First Deputy Defense Minister Ruslan Tsalikov to say that the first domestic inoculations were ready for use, as per the latest reports.
On the coronavirus front, the latest increase in the US COVID19 death toll, by at least 1,003 on Tuesday – the largest single-day increase since early June – pushes the figure up to 141,920 in total. As the United States crossed the 3.8m mark in coronavirus cases, experts warned that Arizona, Florida, Idaho, Montana, Oklahoma, South Carolina, Tennessee, Texas, Utah, the Virgin Islands and West Virginia are expected to record the most deaths. This could hurt production activities, and the demand for oil may drop, causing a bearish pressure on crude oil.
The weekly official crude oil stocks report from the Energy Information Administration (EIA) is expected to show a drop of -1.95 million barrels, versus the previous figure of -7.493 million barrels. This is going to be the key indicator to watch, as this typically drives sharp action in oil prices. While the economic calendar is lighter 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. The updates concerning the US fiscal package discussions and news about coronavirus vaccines could offer intermediate moves for the oil traders. Good luck!