During Monday’s Asian trading session, the WTI crude oil prices failed to gain any positive traction, and dropped to $ 40.91, while representing 0.22% losses on the day, mainly due to the mixed market sentiment, backed by the intensifying coronavirus woes and intensifying tensions between the US and China, both of which fueled concerns regarding the growth of demand.

The escalating geopolitical tensions between the world’s two biggest economies, following the closures of the consulates in Houston and Chengdu, exerted some downside pressure on crude oil prices. Aside from this, the selling bias for the broad-based US dollar, triggered by the ongoing slide in the US Treasury bond yields, is becoming one of the major factors that is keeping a check on any further downside in the crude oil prices. At the moment, crude oil is trading at $ 41.17 and consolidating in the range between 40.91 – 41.39.

On the coronavirus front, the long-lasting pandemic continues to fade expectations of a recovery in the demand for fuel. As per the latest reports, the United States crossed 4 million officially recorded Covid19 cases, and a significant portion of this alarming figure was recorded in just the last 15 days.

Every day, from Tuesday to Friday, there were almost 1,000 corona deaths in the US, and on Friday, a near-record 74,000 new cases were reported. California, with a population of almost 40 million – about twice that of Florida – is now the worst-hit state, as it approaches 450,000 cases. Globally, the number of coronavirus infections has now passed the 16 million mark, as per the Johns Hopkins University report. This non-stop increase in cases of the virus is affecting global economic growth, which in turn has resulted in the US dollar dropping to 22-month lows, giving the dollar-denominated yellow-metal commodity a boost.  

Apart from this, the reason behind the investors’ cautious sentiment could also be associated with the reports of the storm Hanna, which hit the Texas coast over the weekend, and warnings of heavy rains in Texas and Mexico are also weighing on the investor’s sentiment. The oil and gas producers and refiners announced on Friday that they did not expect the storm to affect operations, and this news has given investors some confidence.

As we all well aware, the United States and the dragon nation have ordered the closure of the opposite nation’s consulates in their respective countries, namely the Chinese consulate in Houston and the US consulate in Chengdu, and this also exerted downside pressure on crude oil. However, the ongoing war between the US and China picked up further pace after US Secretary of State Michael Pompeo called for an end of “engagement,” a policy that has defined US-China relations for approximately 5 decades. On the other hand, both nations are still at loggerheads over issues such as trade, Hong Kong’s national security laws, Xinjiang and the Chinese claims in the South China Sea.

On the positive side, the demand for crude oil has improved slightly, from the deep trough of the second quarter, and this is offering slight support for the oil prices. However, the recovery path could be short-lived, as the renewal of lockdowns in the United States and other parts of the world could start to weigh on the demand for oil.

On the USD front, the broad-based US dollar remains depressed and continues to report losses on the day, due to the US seeing a record daily increase in the number of COVID19 cases. Increasing US-China tensions over the latest disagreement between the two countries also weighed on the USD. The losses in the US dollar were further bolstered by sliding US Treasury bond yields, which further boosted the non-yielding yellow metal. However, the losses in the US dollar helped to limit deeper losses in the oil prices, as the price of oil is inversely related to the price of the US dollar. Meanwhile, the US Dollar Index, which tracks the greenback against a basket of other currencies, slipped by 0.47%, to 93.933, by 12:15 AM ET (05:15 AM GMT), continuing its slide from Friday.

Looking forward, the market players will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum for gold. The Durable Goods Orders release will also be key to watch. In addition, the US stimulus progress will be closely observed, ahead of the US Federal Reserve (Fed) monetary policy decision, which is due to happen on Wednesday. Good luck!