During Thursday’s Asian trading session, the WTI crude oil prices continued to flash red, dropping to $ 42.46, mainly due to the OPEC report, suggesting a bigger fall in the fuel demand than was expected. The risk-off market sentiment, triggered by the geopolitical tensions and the inability of the US Congress to reach an agreement on the US latest COVID-19 stimulus package, also weighed on the oil prices.

On the other hand, the US government data showed a fall in inventories, suggesting that the demand is returning, and this became the key factor that capped any further downside for the crude oil prices. Moreover, the weakness of the broad-based US dollar, triggered by the coronavirus crisis, also helped to limit deeper losses for the crude oil prices. At the moment, crude oil is trading at $ 42.50 and consolidating in the range between $ 42.46 – 42.69.

The Organization of the Petroleum Exporting Countries (OPEC) said, in a monthly report, that the world fuel demand would drop by 9.06 million BPD this year, more than the 8.95 million BPD decline expected a month ago. According to the keywords, “oil demand will drop more steeply in 2020 than previously forecast, due to the coronavirus pandemic, and there are doubts about next year’s recovery. This report initially weighed on crude oil prices.

On the contrary, the EIA data released forecast a draw of 4.512 million barrels against the 2.875 million-barrel draw in predictions. This data helped the WTI gain traction of late. In the meantime, the EIA said that while US fuel demand had increased to 19.37 million barrels per day (BPD) during the previous week, the highest since March, crude output dropped from 11 to 10.7 million BPD, with some investors now starting to fear a shortage.

On the US-China front, the rising tensions between the United States and China are still drawing market attention, as the Dragon Nation sternly warned the United States that they would take revenge over the banning of the Chinese app, TikTok. Meanwhile, the Republican leader has signed an executive order to raise barriers for US businesses connecting to China’s TikTok and WeChat apps. These lingering Sino-US tensions could keep crude oil prices under pressure, as we head into the weekend.

The failure of the Democrats and Republicans to offer any announcement on the coronavirus (COVID-19) relief package also weighed on the market risk sentiment. The US Trade Representative (USTR) Robert Lighthizer imposed further tariffs on France, Germany, Greece and the UK, which eventually stopped the upbeat performance of the previous day’s market and contributed to the losses in the oil prices.

On the other hand, the reasons for the mixed trading sentiment could also be attributed to the renewed geopolitical tensions, triggered after the US administration’s show of power, as they sent stealth bombers close to Taiwan, to fight the Chinese threat by showcasing nuclear weapons. Furthermore, the US Central Command’s tweet, suggesting that the Iranian Navy had seized a ship called the “Wila”, also increased geopolitical tensions, and this was ultimately considered negative for the trading market.

On the USD front, the broad-based US dollar extended its losses due to the inability of the US Congress to reach a consensus for the country’s latest COVID-19 stimulus package. However, the decline in the US dollar became the key factor that capped any further downside for the crude oil prices, as the price of gold 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, was down by 0.18%, to 93.237, by 9:52 PM ET (2:52 AM GMT). The market players will keep their eyes on the coronavirus updates and geopolitical tensions. The weekly jobless claims will also be key to watch on the day. Good luck!