The WTI crude oil prices traded with a mild bullish bias, taking modest bids above the $ 41 level, mainly after the American Petroleum Institute (API) showed a big draw in inventories, against all expectations, which eventually overshadowed demand concerns and gave the market a boost. 

However, the on-going uncertainty surrounding the new COVID19 aid package capped any further gains for the crude oil prices. 

Apart from this, the second wave of coronavirus cases worldwide and the intensifying Sino-US tussle also weighed on the oil prices, urging investors to refrain from placing any strong positions. Meanwhile, the weakness of the broad-based US dollar, in the wake of the US coronavirus crisis, favored the oil bulls. At the moment, WTI Crude Oil is trading at $ 41.18 and consolidating in the range between 40.93 and 41.28. 

On the data front, according to the American Petroleum Institute (API) reports released on Tuesday, the WTI Crude Oil inventories dropped by 6.829 million barrels in the week ended July 24. It is worth mentioning that the analysts anticipated a moderate inventory build-up of 357,000 barrels, after the preceding week’s unexpected increase of 7.544 million barrels. 

Despite the surprise drop in inventories, investors failed to put any significant bid under the crude oil prices during Tuesday’s US trading session, possibly due to the resurgence of coronavirus cases, and the on-going war between the US and China also left a negative impact on the oil prices and capped additional gains.

The fears of low demand remained on board, as numbers of coronavirus cases are increasing continually across the globe. As per the latest report, the number of confirmed coronavirus cases in the state of Arizona increased by 2,107, to a total of 165,934 so far, while the death toll increased by 104, to 3,408. However, there was a small drop by 62 cases in the current rate of hospitalization,  bringing it to 2,564. 

Apart from this state, according to a statement by Florida’s Department of Health, the number of confirmed coronavirus cases in Florida rose by 9,230 to 441,977, while the death toll rose by 191 to 6,240, accompanied by a decrease in hospitalization by 75, to 9,023. However, these fears have significantly influenced the market trading sentiment and provided support to crude oil prices.

Besides the virus woes, crude oil’s failure to cheer the positive inventory data could also be associated with the reports of the long-lasting US-China tussle. The tit-for-tat closures of consulate offices in Houston and Chengdu triggered the most serious escalation of tensions between the US and China so far. As a result, the two nations could be heading for a total breakdown of relations within the next few months, which could hurt the trade deal that exists between the two countries. 

Despite the heightened fears of the coronavirus in the United States, US policymakers still have differences in Phase 4 of the COVID-19 bill. White House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows recently killed the US policymakers’ expectations that the government would soon deliver the much-awaited fiscal package. They indicated that the differences between the Republicans and Democrats were behind the lack of progress over the much-awaited stimulus. This gloomy update also added pessimism regarding the crude oil prices.

The broad-based US dollar failed to gain any positive traction on the day, reporting losses as the virus-related crisis in the United States could ruin hopes for a quick economic recovery, which of course is keeping the investors cautious. However, the decline in the US dollar helped the oil prices to stay higher, as the price of oil is inversely related to the price of the US dollar. Meanwhile, the dollar index stood at 93.720 (DXY) this week, against six major currencies – this is close to its lowest level since June 2018.

The market players will closely follow the US Fed meeting, at which the US central bank will likely keep rates unchanged and sound dovish on the day. The traders will keep their eyes on the USD price dynamics and the coronavirus headlines, and this could play a key role in influencing the intraday momentum. Furthermore, it will be essential to watch the Goods Trade Balance and Pending Home Sales m/m. Good luck!