Crude Oil Took Modest Bids Amid Saudi Aramco’s Upbeat Demand!
Arslan Butt • 3 min read
During Monday’s Asian trading session, the WTI crude oil prices took modest bids above the mid-41.00 level, but they remain trapped in the past weeks’ thin trading range. However, the fresh bullish bias in crude oil could be attributed to the Saudi optimism regarding Asian fuel demand. The Iraqi promise to intensify supply cuts also added strength to the crude oil prices. The risk-on market sentiment, backed by the hopes of further stimulus and upbeat China inflation data, also exerted a bullish impact on oil prices. The weakness of the broad-based US dollar, triggered by the upbeat market, also impressed oil bulls and kept the oil prices bullish. Across the pond, the intensifying geopolitical tensions between the US and China, coupled with the coronavirus crisis, became a key factor that capped further gains in the oil prices. At the press time, the WTI crude oil is trading at 41.72 and consolidating between 41.23 and 41.87. It’s worth recalling that Trump signed four executive orders at the weekend, related to COVID-19 economic aid, unemployment benefits, a temporary payroll tax deferral, eviction protections, and student-loan relief. This, in turn, raised the risk sentiment and lent support to the oil prices.
Apart from this, President Donald Trump said on the day, that the US Democrats and the White House were showing a willingness to restart talks on a deal regarding the new support package for cash-strapped US states, that have been hard-hit by the coronavirus pandemic. As per the keywords, “The Democrats have called, and they want to get together”, this report instantly boosted the hopes of further stimulus and supported the market trading sentiment, adding to the gains in crude oil.
Despite Friday’s better-than-expected US payroll report, the broad-based US dollar failed to gain any positive traction. It edged lower on the day, as doubts over the US economic recovery remain, thanks to the coronavirus crisis. However, the US dollar losses could also be attributed to the uptick in the US stock futures. The losses in the US dollar kept the oil prices higher, as the oil price is inversely related to the price of the US dollar. The US Dollar Index, which tracks the greenback against a basket of other currencies, dropped by 0.11%, to 93.308, by 10:16 PM ET (3:16 AM GMT).
Elsewhere, the crude oil gains were further bolstered by the positive comment by Saudi Aramco’s Chief Executive, Amin Nasser, that fuel demand is expected to recover in Asia in the wake of the gradual easing of coronavirus lockdown restrictions. He added: “Look at China. Their gasoline and diesel demand is almost at pre-coronavirus levels”, and this also kept investors confident, contributing to the oil price gains.
Iraq’s promise to cut its oil production by 400,000 barrels per day in August and September, to compensate for the past three months’ oversupply, could also be lending some support to the crude oil prices. Iraq’s oil minister, Ihsan Abdul Jabbar, said last week that his country would be stepping up production cuts to compensate for failing to comply with a deal made in April to limit oil production under an OPEC+ supply pact.
On the coronavirus front, the US crossed the five-million mark for COVID-19 cases, as of August 10, as per the Johns Hopkins University. meanwhile, Australia’s second most populous state, Victoria reported the biggest single-day rise in the death toll. As per the latest figures, Australia’s coronavirus death toll has crossed the 314 mark, with Victoria announcing a daily record of 19 deaths and 322 new cases in the past 24 hours. This crisis has turned out to be the major factor that has limited the crude oil prices.
Regarding the worsened relations between the world’s top two economies, Trump has banned US companies from doing any business with TikTok and WeChat, in the wake of a national security threat. The tension between the two financial giants was further bolstered after the US imposed sanctions on senior Hong Kong and Chinese officials, including Hong Kong’s Chief Executive Carrie Lam, last week. In the meantime, the White House National Security Adviser, Robert O’Brien, blamed China for targeting US election infrastructure ahead of the 2020 US Presidential election.
Moreover, the gains in the oil price were further bolstered by China’s upbeat CPI and PPI data for July. On the data front, China’s July CPI rose to 2.7% YoY, compared to the expected +2.6%, while China’s July PPI dropped to -2.4% YoY, compared to the projected -2.5%.
No major data was released during the Asian session on the day, which so this will keep the market light ahead. However, the market traders will keep their eyes on the USD price dynamics, coronavirus headlines and news concerning China, all of which could play an important part in changing the intraday momentum. Good luck!