During Wednesday’s Asian trading session, the WTI Crude Oil prices failed to stop the overnight declining streak, picking up further offers below the $ 40.00 level, mainly due to the resurgence of the coronavirus, which is leading to further lockdown restrictions on activities and undermining the demand for crude oil. Apart from this, the data from the American Petroleum Institute, which showed that US crude oil stocks had dropped, against expectations, also weighed on the crude oil prices. Thus, the economic forecasts for future consumption, amid the COVID-19 pandemic and continued oversupply issues, were the primary factors behind the heavy drop in crude oil.

Besides this, the resumption of Libyan oil production added further bearish pressure to the crude oil prices. Elsewhere, the intensified US-China tussle, over several issues, also exerted downside pressure on the crude oil prices. Meanwhile, the fresh strength of the broad-based US dollar, backed by the risk-off market mood, also played its role in undermining the oil prices. At the moment, crude oil is trading at $ 39.02 and consolidating within a range between 38.77 and 39.25.

On the data front, on Tuesday, the American Petroleum Institute (API) showed a draw of 831,000 barrels, against an expected build of 1.4 million barrels, for the week ending Sept. 25, and after the previous week’s build of 691,000 barrels. But, this draw was not enough to to make oil prices recover.

However, the worries about the global economic recovery are still hovering all over the market, amid rising numbers of coronavirus cases, which in turn has caused US stocks to drop sharply, with the S&P 500 futures declining from the session high of 3,357 to 3,314. Thus, the concerns of rising numbers of COVID-19 cases in the US, the UK, Spain, and some other notable European nations like France, are fueling fears of fresh restrictions on activities. This, in turn, has weakened the oil prices. As per the latest report, the global death toll from the COVID-19 pandemic crossed the 1-million mark earlier in the week, and case numbers continue to rise. All of this keeps fueling worries over the global economic recovery.

Elsewhere, the risk-off market sentiment was further bolstered by the ongoing uncertainty over the US elections, as Trump’s comments reinforced fears of a delay in the election result, which the US equity options market has been pricing for some time, and this triggered risk aversion. Besides this, the ongoing tussle between the United States and China also kept the market sentiment under pressure.

As a result, the broad-based US dollar succeeded in stopping its losses of the previous day, taking safe-haven bids on the day, amid a market risk-off sentiment. However, the gains in the US dollar could be short-lived or temporary, due to the worries that the economic recovery in the US could grind to a halt, because of the resurgence of coronavirus cases and US post-election uncertainty, which could be bad for the economy, both in the US and globally. However, the gains in the US dollar kept the oil prices under pressure, as the price of oil is inversely related to the price of the  US dollar. Meanwhile, by 12:53 AM ET (4:53 AM GMT), the US Dollar Index, which tracks the greenback against a basket of other currencies, had risen by 0.05%, to 93.977 .

Across the pond, the reason for the losses in crude oil could also be associated with the reports of the CEOs of the world’s biggest trading companies, which suggest a weak recovery in the oil demand and little movement in prices in the coming months, or potentially even years. Apart from this, the bearish sentiment surrounding the oil prices was further bolstered by the low demand for jet fuel.

Looking forward, the traders will keep their eyes on the ongoing drama surrounding the US elections and updates on the US stimulus package. Meanwhile, crude oil supply data from the US Energy Information Administration (EIA), which is due later in the day, will be key to watch.