During Tuesday’s Asian trading session, the WTI crude oil prices failed to stop their declining streak of the previous session, remaining depressed under the $ 47.00 mark, as the tighter lockdown restrictions in Europe and the downbeat forecast over the fuel demand recovery for next year overshadowed the start of COVID-19 vaccination efforts and contributed to the losses in the crude oil prices.

In the meantime, the UK has increased restrictions while ordering bars and restaurants to close, as COVID-19 infection rates continue to rise sharply, which has raised further doubts over the fuel demand in the near term. Apart from this, the Organization of Petroleum Exporting Countries and allies, or OPEC, has cut its forecast for oil production in 2021 by 350,000 barrels per day, as COVID-19 infection rates continued to rise sharply.

This, in turn, put further pressure on the crude oil prices. On the contrary, the upbeat market sentiment played a major positive role in helping to limit the losses in the higher-yielding crude oil prices. As a result, the upbeat market mood is receiving support due to the hopes surrounding the coronavirus vaccine and the Brexit talks.

As a result, the broad-based U.S. dollar failed to gain any safe-haven bid and edged lower on the day, which also helps the crude oil prices limit its deeper losses as the oil price is inversely related to the price of the U.S. Meanwhile, the crude oil prices’ losses were also capped by the upbeat Chinese data, which showed the economic recovery improved in November. At the moment, crude Oil is trading at $46.88 and consolidating in the range between 46.62 – 47.02.

The second wave of the coronavirus has led to renewed lockdown measures worldwide, which is continuously threatening the recovery in the demand for crude oil. The resurgence of the coronavirus (COVID-19) in Europe and the US is still not showing any signs of slowing down and this keeps fueling doubts over the economic recovery, as the authorities in the US and Europe keep announcing additional restrictions over activities, in an effort to curb the spread of the virus.

As per the latest report, the UK has tightened restrictions while requiring bars and restaurants to close, as COVID-19 infection rates continue to rise sharply. In the meantime, Italy said that they are willing to impose stricter restrictions over the Christmas holidays, while most German stores have been ordered to close until Jan. 10. This, in turn, exerted downside pressure on the market risk tone and contributed to the losses in crude.

The reason for the bearish crude oil prices could also be associated with the long-lasting US-China tussle, which is continuously picking up pace after the US imposed fresh sanctions on diplomats from Beijing. Elsewhere, the Brexit issue remains on the cards, amid mixed headlines that are keeping market players on edge. However, these mixed headlines also played a major role in undermining the crude oil prices.

Despite all these concerns, the market trading sentiment managed to extend its positive performance of the previous day. It remained supported by optimism over a potential vaccine/treatment for the highly infectious coronavirus. Let me remind you that on Dec. 11, the US Food and Drug Administration (FDA) granted permission for the emergency use of BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE: PFE) and BioNTech SE (F:22UAy). However, the positive developments surrounding the coronavirus vaccine keep favoring the market risk-on mood, which is helping to limit deeper losses in the crude oil prices.

On the USD front, the broad-based US dollar failed to put a stop its bearish bias of the previous day, drawing further offers on the day, as the demand for the safe-haven assets decreased amid progress toward agreeing on the US fiscal stimulus and optimism regarding a Brexit deal. On the other hand, the losses in the US dollar were further bolstered by the expectations that, at its last policy meeting of 2020, the Fed will keep interest rates low for an extended period. However, the losses in the greenback became the key factor that kept a lid on additional losses in crude oil prices, as the price of oil is inversely related to the price of the US dollar. The US Dollar Index Futures, that tracks the greenback against a bucket of other currencies, has dropped to 90.642.

Conversely, the losses in the crude oil prices might be capped by the rapid recovery in demand in China, witnessed after China’s Retail Sales increased by 5.0% year-on-year in November, marking the 4th successive month of growth. Industrial Production, a gauge of manufacturing, mining and utility output, rose 7% year-on-year versus October’s 5.9%. Elsewhere, the crude oil priceswere also boosted somewhat from reports suggesting that there was an explosion on a fuel transport ship at the Saudi Arabian port of Jeddah on Monday.

In the absence of any key data/events on the day, the market traders will keep their eyes on the crude oil inventory data from the American Petroleum Institute, due to be released later in the day. In addition to this, the updates about the US stimulus package will also be key to watch. In the meantime, the risk catalysts, like geopolitics and the virus woes, not to forget the Brexit, will not lose their importance. Good luck!