Crude Oil Fails to Extend Buying Trend – Increased Oil Stock Pressures!
Arslan Butt • 3 min read
During Thursday’s Asian trading session, WTI Crude Oil failed to maintain its bullish trend of the previous day, dropping below the $ 53.00 level, mainly after data showed that US crude stocks rose last week, surprisingly, which triggered renewed worries about fuel demand and contributed to the losses in crude. Meanwhile, the sharp jump in the coronavirus-related deaths and infections sparked fears that more countries, like Europe, China, the UK and some Pacific nations, could impose lockdowns, which put pressure on the crude oil prices.
Besides this, the gloomy forecast from the International Energy Agency’s, regarding the oil demand in 2021, exerted some additional downside pressure on the crude oil prices. Reports suggesting that China has imposed fresh sanctions on 28 US Americans, most of whom were in the Trump administration, could also be weighing on the crude oil prices. On the positive side, the upbeat market sentiment is helping to limit deeper losses in the higher-yielding crude oil prices. The market trading mood is receiving support, due to Joe Biden’s first executive orders to rule-out Trump’s actions, together with Biden’s new methods for combatting the virus, which also lent some support to the market sentiment. Meanwhile, the hopes for massive US financial stimulus measures under the newly inaugurated Joe Biden administration also played a significant role in underpinning the market sentiment, which could cap losses for crude oil.
As a result, the broad-based US dollar failed to gain any positive traction, edging lower on the day, supporting the crude oil prices and limiting any deeper losses, as the oil price is inversely related to the price of the greenback. At the moment, crude oil is trading at $ 53.13, and consolidating in the range between52.90 and 53.24.
The record number of deaths in the UK, due to the coronavirus, and expectations of further worsening of the COVID-19 situation almost everywhere, have led to renewed lockdown measures throughout the world, which are posing a continuous threat to the recovery of the crude oil demand. As per the latest report, the coronavirus death toll in the United Kingdom hit a record high overnight. Considering the current virus conditions, the International Energy Agency presented a grim outlook on the oil demand for 2021, which added a further burden to the crude oil prices.
Across the ocean, the buying interest in the equity market has picked up further pace following the willingness of scientists in Oxford to develop new versions of their vaccine, in an effort to combat emerging strains of the virus. Meanwhile, the World Health Organization (WHO) also supports the faster rollout of COVID-19 vaccines, which had resulted in an improved market sentiment.
On the USD front, the broad-based US dollar failed to stop its bearish bias of the previous day, drawing further offers on the day, as demand for the safe-haven assets decreased amid progress toward agreeing on US fiscal stimulus and optimism regarding potential vaccine/treatment for the highly infectious coronavirus. However, the losses in the US dollar have become a key factor that has limited additional losses in WTI Crude Oil, as the oil price is negatively related to the price of the greenback. Meanwhile, by 11:26 PM ET (4:26 AM GMT), the US Dollar Index, which tracks the greenback against a bucket of other currencies, had dropped by 0.19%, to 90.300 .
Meanwhile, the losses in the crude oil prices could also be attributed to the long-lasting tussle between the US and China. The Dragon Nation has released a list of 28 US individuals, most of whom are members of Trump’s team, who will be sanctioned. This resulted in further tensions between the two largest economies in the world. The European Central Bank’s (ECB) monetary policy will also be key to watch. Besides this, the usual risk catalysts, like geopolitics and the virus woes, will continue to exert their influence. Good luck!
About the author
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.