The WTI Crude Oil prices failed to maintain the gains of the previous day and sidelined to around $ 43.00, with moderate losses of 0.15% on the day, as hurricane Laura was unable to exert any major impact on the Gulf of Mexico. It is worth mentioning that the path of the potent storm moved inland, past the heartland of the US oil industry, in Louisiana and Texas, without having any general impact on refineries.

On the contrary, the weakness of the broad-based US dollar, triggered by the Federal Reserve’s latest decision to offer a more relaxed inflation policy, became the critical factor that helped to limit deeper losses ahead in the oil prices. The downbeat US job data could also be weighing on the greenback. In the meantime, the Fed chairman also feared prolonged weakness of inflation and employment numbers, amid the coronavirus (COVID-19) woes, which also kept the oil prices under pressure.

The risk-on market sentiment, backed by the optimism over a potential vaccine/treatment for the coronavirus, and little hope regarding the US stimulus package, helped curb heavier losses in terms of the oil prices. Crude oil is trading at $ 43.06 and consolidating in the range between 42.78 and 43.12.

It is worth recalling that Hurricane Laura hit Louisiana on the previous day, at wind speeds of 150 mph (240 kph), causing damage to buildings, ripping down trees and cutting the power supply to more than 650,000 people in Louisiana and Texas. Despite this, the refineries were saved from the massive flooding that was originally anticipated. This, in turn, weighed on the oil prices initially. Let me remind you; the US producers shut down production to the tune of 1.56 million barrels per day of WTI oil production, or 83% of the total production in the Gulf of Mexico, while nine refineries shut down approximately 2.9 million BPD incapacity, or 15% of the US processing capacity, ahead of the storm.

On the Fed front, the Federal Reserve’s latest decision to use a more relaxed inflation policy, kept the US dollar under pressure. Fed Chairman Powell’s speech during the Jackson Hole event on Thursday suggested that the central bank will now be more prepared to allow inflation to rise above the 2% inflation target, before raising interest rates. However, the tolerance for higher inflation and prolonged low-interest rates undermined the US dollar and supported oil prices.

On the USD front, the broad-based US dollar failed to extend its previous gaining streak, dropping on the day, after the Federal Reserve’s latest decision. Moreover, the losses in the US dollar could also be associated with the downbeat US job data, which showed that 1.006 million initial jobless claims were filed over the past week. This, in turn, fueled worries about the recovery of the US labor market. However, the losses in the US dollar kept the oil prices higher, 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 basket of other currencies, dropped by 0.20%, to 92.802, by 12:24 AM ET (5:24 GMT).

Across the ocean, the on-going optimism over a potential vaccine/treatment for the highly infectious coronavirus boosted the market trading sentiment, which also helped to limit losses in the crude oil prices. Furthermore, the draining inventories and global policymakers’ production cuts also played a positive role in boosting the oil prices.

Besides this, the receding coronavirus figures in most countries also exerted a positive impact on the market trading sentiment. Another supporting factor for the trading sentiment could be the discussions concerning the US coronavirus (COVID-19) stimulus package. US House Speaker Nancy Pelosi has suggested further easing of the Democratic demand, to around $ 2.2 trillion.

Looking forward, the second half of the Jackson Hole Symposium and the usual risk catalysts will be key to watch on the day. Notably, the continuous drama surrounding the US-China relations and updates about the US stimulus package will be followed closely. In the meantime, traders will also follow the USD moves and coronavirus headlines closely, as they could play a key role in the gold run-up. Good luck!