Crude Oil Choppy Session Continues – Quick Fundamental Outlook!

During Tuesday’s Asian trading session, WTI crude oil failed to stop its previous day’s losing streak and remained depressed around below the $61.00 level over new pandemic lockdowns. Slow vaccine rollouts in Europe tend to weaken fuel demand recovery, which in turn weighs on the crude oil prices. Across the Atlantic, the reason for the heavy losses in oil prices could also be tied to the market’s prevalent downbeat sentiment, which was being pressured by the third wave of COVID-19 infections. Meanwhile, the US-China and the Iran-Saudi Arabia tussle, not to forget the Washington-Tehran and American-North Korea tensions, also played their major role in undermining the market sentiment. Besides this, the broad-based U.S. dollar strength, backed by the risk-off market sentiment, was also seen as one of the key factors that kept the crude oil prices under pressure as the oil price is inversely related to the price of the U.S. dollar. At the moment, crude oil is trading at $60.98 and consolidating in the range between 60.73 and 61.36.

The third-wave of coronavirus diseases is not showing any sign of slowing down but getting worse day by day. In turn, European countries, including Germany, are considering reimposing restrictive measures. In the meantime, New York City mayor Bill de Blasio asked for a pause on the city’s reopening, citing insufficient information about COVID-19 variants. Thus, the demand has decreased in South East Asia and is not expected to pick up to pre-COVID levels until the end of 2021. Conversely, investors remained confident about the longer-term outlook in the wake of continuing global COVID-19 vaccine rollouts and a $1.9 trillion boost from the U.S. in the form of its stimulus package.

The bearish crude oil prices could also be associated with the geopolitical fears from the Western tussle with China over Xinjiang human rights violations. In the meantime, the cautious sentiment ahead of Congressional testimony by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen probes investors for placing any strong position.

On the USD front, the broad-based U.S. dollar extended its previous day’s positive moves and remained bullish on the day amid a downbeat market mood, which tends to underpin safe-haven assets like U.S. dollar. It is worth recalling that the U.S. dollar has risen 2% so far during the 1st-quarter of 2021 and was being supported by the rollout of COVID-19 vaccines in the U.S. and the signing of a $1.9 stimulus package into law earlier in the month. Strong hopes for U.S. economic recovery also pushed U.S. bond yields up and drew investors to the U.S. dollar. However, the gains in the U.S. dollar become the key factor that kept the crude oil prices under pressure as the price of oil is inversely related to the price of the U.S. dollar. Meanwhile, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose 0.12% to 91.847 by 12:26 AM ET (4:26 AM GMT).

On a different page, the Organization of the Petroleum Exporting Countries and allies (OPEC+) will meet on April 1 to determine production policy for May. However, the cartel has continued to put a floor under prices through its production cuts, scheduled to expire at the end of April.

Looking forward, the market traders will keep their eyes on the U.S. crude stockpile data from the American Petroleum Institute, which is expected to be released later in the day. Analysts expect U.S. crude inventories to dropped by nearly 900,000 barrels in the week to March 19 while refinery utilization increased by 3.2 percentage points. In addition to this, the updates about the coronavirus (COVID-19) vaccine will also be key to watch. Good luck!