WTI Crude Oil Consolidates in Narrow Ranges – a Quick Fundamental Outlook!
Arslan Butt • 3 min read
During Thursday’s Asian trading session, the WTI crude oil prices extended their overnight losses, falling from $ 43.24 to $ 42.63, as major producers fueled doubts about the recovery in demand if the coronavirus crisis continues. However, the US fuel demand dropped, amid postponed talks on a post-coronavirus economic stimulus package. The US crude inventories dropped less than expected, and this has also weighed on the oil prices of late.
On the other hand, the geopolitical tensions between the US and some notable countries, like Iran and Russia, have also contributed to the losses in the oil price. Elsewhere, the latest recovery of the board-based US dollar, triggered by a combination of factors, has also become a key factor that is keeping the oil prices under pressure. At the moment, crude oil is trading at $ 42.70, and consolidating in the range between 42.63 – 42.97.
On the data front, as per the data from the US Energy Information Administration (EIA), which was released on Wednesday, over the last four weeks, the fuel demand was down 14% from the same period the previous year.
Meanwhile, the EIA also reported a 1.632 million-barrel draw in US crude stockpiles, for the 4th consecutive week of draws. But the traders failed to cheer this mildly positive data, as the draw was smaller than both the projected 2.670 million-barrel draw and the previous week’s 4.512 million-barrel draw. It is worth recalling that the American Petroleum Institute (API) reported a draw of 4.264 million barrels the day before.
Apart from this, the oil buyers also failed to cheer the on-going tension between Washington and Tehran. As per the latest reports, US President Donald Trump is willing to announce punitive measures to be imposed on Iran. Furthermore, Secretary of State Mike Pompeo warned that the US would hold China and Russia responsible if they tried to stop sanctions from snapping back on Iran.
On the other hand, the intensifying tensions between the US and China also added to the burden on crude oil prices. This was compounded by US President Donald Trump’s statement that he had suspended the trade talks with China, while White House Chief of Staff Mark Meadows confirmed that, for now, the trade talks have not been re-scheduled. However, these lingering Sino-US tensions kept the equity market under pressure, contributing to the losses in the oil price.
The failure of the Democrats and Republicans to offer any new announcement on the coronavirus (COVID-19) relief package, amid political differences, is also weighing on the crude oil prices. However, the market traders gained some confidence about the stimulus package, after the senior US official said that he had noticed a ‘real desire’ by some Democrats and Republicans to reach an agreement on a smaller stimulus deal of around $ 500 billion.
The broad-based US dollar extended its bullish bias on the USD front, taking some bids on the day, probably due to the lack of progress on the COVID-19 stimulus package. However, the gains in the US dollar became the key factor that kept the crude oil prices down, 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 bucket of other currencies, rose by 0.03%, to 93.052, by 9:44 PM ET (2:44 AM GMT).
Looking forward, the market traders will keep their eyes on the US Jobless Claims, the Philly Fed Manufacturing Survey and the minutes of the European Central Bank (ECB) policy meeting, all of which are scheduled to release data later today. The headlines concerning the US COVID-19 aid package, the latest virus figures and the Sino-American trade deal have not lost any importance either. Good luck!