WTI Crude Oil Fails To Stop its Overnight Losses – A Quick Fundamental Outlook!

During Wednesday’s Asian trading session, the WTI Crude Oil prices failed to stop their overnight losing streak, dropping further below the mid-$ 39.00 level, mainly due to negative inventory numbers from the American Petroleum Institute (API), which fueled worries about the oil demand. Apart from this, the resurgence of the coronavirus (COVID-19), which is leading to further extensions of lockdown restrictions, is also adding a burden to the crude oil prices.

Furthermore, the strength of the broad-based US dollar, supported by upbeat US economic data, could also be considered one of the main factors that kept the oil prices under pressure. On the contrary, the market risk-on tone, supported by the hopes of a coronavirus (COVID-19) aid package, has become a key factor keeping a lid on any additional losses in the crude oil prices. At the moment, crude oil is trading at $ 39.58, and consolidating in the range between 39.27 and 39.80.

On the data front, the inventories increased by 0.691 million barrels, against the previous dip of 9.517 million barrels during the week ending September 18, as per the weekly Crude Oil Stock data from the API.

Apart from this, the concerns over the oil demand were also fueled by the surging number of coronavirus infections. As per the latest report, the US has crossed 200,000 COVID-19 deaths, and multiple European countries are imposing lockdown restrictions, which has caused concerns over an ever-greater drop in demand. Meanwhile, the UK set stricter measures on Tuesday, with suggestions that the previous lockdown may need to be reimposed. This, in turn, undermined the crude oil prices.

Apart from virus woes, the reason behind the investors’ cautious sentiment could also be associated with the long-lasting US-China tussle, which is picking up pace continuously.

On the positive side, the hopes of a coronavirus (COVID-19) aid package boosted the stock prices, which might help to limit any deeper losses in oil. It is worth reporting that US Congress recently indicated its agreement to the bipartisan stop-gap funding bill, in order to avert the government shutdown by the end of the current month. This will help to settle differences between the ruling Republicans and the opposition Democratic party. However, the hopes of a stimulus package could be considered one of the key factors that have been supporting the market sentiment.

Despite the risk-on market sentiment, the broad-based US dollar succeeded in gaining positive traction, taking strong bids on the day, amid upbeat US data and a pullback in technology shares. However, the gains in the US dollar seem rather unaffected by the upbeat market tone, and the Greenback is holding its gaining streak, at least for now. However, the modest gains in the US dollar have kept the oil prices down, as the price of oil is inversely related to the price of the US dollar. Meanwhile, by 9:38 PM ET (1:38 AM GMT), the US Dollar Index, which tracks the greenback against a basket of other currencies, had edged up by 0.18%, to 94.162.

In the absence of any significant data/events on the day, the market traders will keep their eyes on the preliminary readings of the September PMIs from the UK, Europe and the US, for fresh direction. Meanwhile, the USD price dynamics and coronavirus headlines will also be key to watch. Good luck!