Crude Oil Succeeds in Halting Friday’s Losing Streak – What Next?
Arslan Butt • 3 min read
During Monday’s Asian trading session, the WTI Crude Oil prices managed to halt their previous losses. They drew fresh bids above the mid-$ 42.00 level, mainly due to the latest report that the Dragon Nation had decided to ship in large volumes of US crude in August and September, which instantly overshadowed concerns about the slowdown in demand recovery, in the wake of the coronavirus pandemic and an uptick in supplies.
On the other hand, the risk-on market sentiment, backed by hopes of the much-awaited coronavirus (COVID-19) relief package, also exerted a bullish impact on crude oil prices. In the meantime, the losses in the broad-based US dollar, triggered by the upbeat market mood, also impressed oil bulls, keeping the oil prices bullish. On the contrary, the coronavirus (COVID-19) woes and the US-China tussle kept the lid on any further gains in the crude oil prices. At the moment, WTI Crude Oil is trading at 42.38, and consolidating in the range between 42.11 and 42.76.
It is worth reporting that the tankers have been provisionally booked by the Chinese state-owned crude oil companies, to carry a minimum of 20 million barrels of US crude for August and September, as per the United States government. Apart from this, there has been an additional rise in purchases by China’s state-owned oil and gas firm, PetroChina, and its largest refiner, Sinopec (NYSE: SHI) Corp. However, these reports initially helped the oil prices to recover Friday’s losses and get fresh bids.
Notably, the Dragon Nation is set to import a record of 32 million barrels of US oil in August, which has reduced investor fears that China, a top US crude buyer, will not meet its purchase promises according to Phase 1 of the trade deal between the two nations.
On the other hand, the bullish tone surrounding the global equity markets weakened 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 latest news that US House Speaker, Nancy Pelosi, had ordered Senators to come back from their month-long vacation, eventually raising hopes of the much-awaited coronavirus (COVID-19) relief package.
As we all well aware, the online meeting between the world’s top two nations, which was initially scheduled for Saturday, was postponed, without any future dates being given. However, the reasons cited were that the US wanted to give China more time to increase their purchases of US agricultural products. This report played a negative role in the market trading sentiment, capping further gains in the equity market.
On the coronavirus front, the worsening COVID-19 situation in many places around the world limited crude oil gains. As per the latest report, France reported over 3,000 new cases for the second day in a row, while Australia’s state of Victoria marked the highest number of coronavirus deaths so far, which resulted in an extended state of emergency until September 13. Meanwhile, Singapore also reported 86 cases at the weekend. At the same time, New Zealand imposed fresh lockdowns after recording increased numbers of Covid-19 cases.
Japanese data also weighed on the market trading sentiment, as the annualized reduction of 27.8% in the April-June GDP made it the worst quarter since recording of data began in 1980. As a result, Japanese Economy Minister Yasutoshi Nishimura expressed his willingness to declare subsidies to back private consumption and employment.
Despite multiple negative factors, the broad-based US dollar failed to gain any safe-haven bids, edging lower on the day, as doubts about the US economic recovery remained, due to the coronavirus crisis. However, the losses in the US dollar could also be attributed to the uptick in the US stock futures. No major data will be released during the Asian session on the day, which will keep the market light ahead. However, the market traders will keep their eyes on the panel meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+). The headlines concerning the US COVID-19 aid package, virus figures and Sino-American trade will be key to watch. Good luck!