During Friday’s Asian trading session, WTI Crude Oil failed to extend its long winning streak, dropping below the $ 58.00 level, as OPEC cut its demand forecast, stating that the fuel demand worldwide for 2021 will recover more slowly than previously thought. Meanwhile, the International Energy Agency said that the supply was still outstripping the demand globally, although COVID-19 vaccines may help them recover.

Apart from this, the weaker-than-expected US Consumer Price Index (CPI) data for January released yesterday raised doubts over economic recovery in the US, and contributed towards  rising fuel demand worries. The bearish sentiment surrounding the crude oil prices was further bolstered after Japan extended activity restrictions in ten regions, while the Australian state of Victoria may also declare a fresh lockdown, amid the emergence of cases of virus variants. Across the pond, the strength of the broad-based US dollar was also seen as one of the key factors that undermined the crude oil prices, as the dollar usually moves inversely to oil. In contrast to this, the previously released bigger-than-expected build in US Supplies and continuing hopes of COVID-19 inoculations has become a key factor that is helping to limit deeper losses in the crude oil price. In the meantime, President Joe Biden’s promise to announce trillions of dollars in new COVID-19 relief measures has eased worries over the global economic slowdown, which could also lend some support to crude oil and limit its bearish rally.

In addition to this, Saudi Arabia’s promise of production cuts has played a major role in supporting the oil prices. At the moment, crude oil is trading at $ 57.81, and consolidating in the range between 57.72 and 57.97. On the data front, the US crude oil supply data from the US Energy Information Administration (EIA) showed a draw of 6.644 million barrels for the week ending Feb. 5, which was much larger than both the 985,000-barrel build in the forecasts and the 994,000-barrel build reported the week before. Tuesday’s data from the American Petroleum Institute showed a draw of 5.821 million barrels.

On the bearish side, the number of virus cases is still not showing any sign of slowing down, which has resulted in Japan extending activity restrictions in ten regions while Victoria, Australia is also set to announce fresh lockdowns, due to the emergence of several cases of the virus variants. Thus, the COVID-19 woes are keeping the energy industry under pressure, which is hurting the higher-yielding crude oil. Furthermore, the recent phone call between the presidents of the US and China has kept the old disputes alive and reignited geopolitical fears, which was seen as a key factor that has kept the market trading sentiment under pressure and contributed to the higher-yielding oil prices.

Despite the downbeat US jobs data, the broad-based US dollar managed to stop its declining streak of the previous session, turning bullish during the Asian session on the day, as traders prefer to invest in safe-haven assets, like the US dollar, amid the downbeat market mood. The US dollar gains were seen as one of the key factors that kept the oil prices under pressure, as the weaker USD tends to make it cheaper for holders of other currencies to purchase crude oil. The US Dollar Index, which tracks the greenback against a bucket of other currencies, is trading close to 90.468.
Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) said that the oil demand worldwide for 2021 would recover more slowly than previously thought. Meanwhile, the International Energy Agency (IEA) said that the oil supply was still exceeding the global demand, which raised doubts over the recovery in the fuel demand.

On the positive side, Saudi Arabia’s promises, regarding the one-sided reductions in output, are lending some support to the crude oil prices, and limiting its losses. Besides that, more stimulus measures are expected to be delivered by US President-elect Joe Biden, which may also help the oil prices.

Moving on, the market traders will keep their eyes on the chatter over the US aid package and the virus updates; meanwhile, the US Michigan Consumer Sentiment will be key to watch. Good luck!