WTI Crude Oil Halts its Bearish Bias of the Previous Day – All Eyes on API Data!

Posted Tuesday, October 13, 2020 by
Arslan Butt • 3 min read

During Tuesday’s Asian trading session, the WTI Crude Oil price succeeded in stopping its  losing streak of the previous day, taking some modest bids above the mid-$ 39.00 mark, ahead of the American Petroleum Institute’s crude oil supply data, which is scheduled for later tomorrow. However, the oversupply concerns remain on the cards, and this keeps challenging the energy market. This is becoming the key factor that is keeping a lid on any additional gains in the crude oil prices.

On the other hand, there are many factors that favor the risk-off market sentiment at the moment, including the prevalent challenges to the US coronavirus (COVID-19) stimulus package, Bejing’s displeasure, due to the US weapon sales to Taiwan, not to forget the Brexit woes, and all of this is playing a major role in capping any gains in crude oil. Across the ocean, additional oversupply concerns are coming from Libya, where the El Sharara field had its force majeure restriction lifted on Oct. 11. This, in turn, exerted additional downside pressure on the crude oil prices, and the ending of the strike in Norway is also putting further pressure on the prices. Thus, the major factors behind the lack of progress could be the restoration of output in Norway and the US. Apart from this, the strength of the broad-based US dollar, backed by the risk-on market sentiment, are also keeping the gains in the oil prices limited, as the price of oil is inversely related to the price of the US dollar. WTI Crude Oil is currently trading at 39.56 and consolidating in the range between 39.37 and 39.66.

It is worth mentioning that the workers have returned to the US platforms in the Gulf of Mexico after Hurricane Delta, and Norwegian workers have also returned to oil rigs after the end of the strike. Apart from this, the Organization of the Petroleum Exporting Countries (OPEC) lifted force majeure restrictions at the El Sharara oilfield, which also raised oversupply concerns and contributed to the losses in oil prices. As per the latest report, the field is expected to produce 300,000 BPD, if it reaches pre-embargo levels, which is likely to double the current output of the North African Organization of Petroleum Exporting Countries (OPEC) members.

Across the pond, the market trading sentiment has been flashing red since the day started. Be it the prevalent challenges to the American coronavirus (COVID-19) stimulus package or Beijing’s displeasure due to the sale of US weapon sales to Taiwan, not to forget the virus woes – all of these factors have been weighing on the market trading sentiment, which tends to underpin safe-haven US dollar.

As a result, the broad-based US dollar managed to extend its early-day gains, taking some further safe-haven bids on the day. However, the gains in the US dollar could be short-lived or temporary, as worries over the economic recovery could come to a halt, amid the second wave of coronavirus cases. 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 9:43 AM ET (1:43 AM GMT), the US Dollar Index, which tracks the greenback against a basket of other currencies, had risen by 0.10%, to 93.108.

Elsewhere, the gains in crude oil were capped by the ongoing doubts over the US stimulus package, which is keeping the market trading sentiment under pressure. Besides this, the tensions between the United States and China has picked up considerable pace, because the Dragon Nation is displeased with the White House arms sale to Taiwan. Beijing’s recent ban on the use of Aussie coal for power stations has further aggravated the situation. All of this, in turn, has undermined the market trading sentiment and it has become the key factor that is capping any further upside in oil prices.

On the contrary, US President Donald Trump’s recovery from the coronavirus, and his promise to deliver a vaccine soon, helped to limit deeper losses in the market, which could be considered one of the major factors supporting the crude oil prices.

Looking forward, market traders will keep their eyes on China’s trade numbers for September, and the crude oil supply data from the American Petroleum Institute. The US Consumer Price Index (CPI) data will also be key to watch. Furthermore, the risk catalysts, like geopolitics and the virus woes, not to forget the Brexit, will not lose any significance. Good luck!

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