During Friday’s early Asian trading, WTI crude oil prices were unable to stop the barren bias of the past two days and fell to a five-month low around $ 35.00 as fears of another global rise in coronavirus cases and surprisingly high weekly U.S. crude stocks its growth has put pressure on the energy market. Apart from this, the resumption of supply in Libya and a Norwegian deal can also be seen as significant factors in keeping oil prices under pressure.
On the other side of the lake, progress in the absence of an agreement on the U.S. coronavirus eradication package has put further bearish pressure on crude oil prices. Meanwhile, concerns about geopolitical tensions between the U.S. and China are putting pressure on market sentiment, which has a bearish impact on crude oil prices. The strength of the broad US dollar, supported by market risk appetite, has also played a major role in undermining oil prices, as oil prices are inversely related to US dollar prices. Crude oil is currently trading at $ 36.08 and is consolidating in the range of 34.93-37.77.
The growing number of COVID-19 cases has reinforced lock-in restrictions across Europe, raising concerns about the prospects for economic recovery in the US and worldwide. According to the latest report, Germany and France have announced new measures to curb the spread of the virus, which in turn is undermining demand for oil. Elsewhere, the UK is embarking on the same path, while Italy, Spain, Portugal and Poland have also registered new peaks in daily cases.
Moreover, the bearish sentiment around oil prices was further strengthened by the unexpectedly large U.S. crude oil inventory last week, as reported by the Energy Information Directorate the previous day, which underlined concerns about declining fuel demand in a deteriorating situation. the global spread of COVID-19, which is undermining the mood over crude oil prices. At the data level, oil inventories increased by 4.3 million barrels, compared to expectations of an increase of 1.23 million barrels. This comes a week after oil stocks fell by 1 million barrels. As a result, the price of crude oil fell by about 5% overnight, remaining below the $ 40 barrel rate.
In addition to viral problems, the reason for caution among investors may also be related to the ongoing U.S. and Chinese struggle over the possible sale of U.S.-made missiles to Taiwan, which is steadily accelerating. On the other hand, the prevailing uncertainty about the outcome of the US presidential election also dampened market sentiment. According to the latest report, national polls show Democratic rival Joe Biden is leading over Republican President Donald Trump.
On the USD front, the broad-based U.S. dollar managed to maintain its winning streak in the previous session as traders continue to prefer safe haven instruments due to the current market sentiment. However, growth in the U.S. dollar was further strengthened by stronger-than-expected U.S. GDP data, which suggested that the world’s largest economy expanded at an annual rate of 33.1% in the third quarter of 2020. However, the bullishness of the US dollar was not affected by growing political uncertainty ahead of the upcoming US presidential election on November 3. However, gains in the U.S. dollar may be short-term or temporary, due to concerns about the U.S. economic recovery. due to the resurgence of coronavirus cases. In addition, the green background gains were further boosted by a lack of progress on the U.S. stimulus package, which put traders in a cautious mood. Thus, gains in the U.S. dollar have become a key factor in keeping the price of crude oil under pressure, as the price of oil is inversely related to the price of the U.S. dollar. However, the gain on the green background kept the oil under pressure. Meanwhile, the dollar index, which compares the dollar to a basket of 6 major currencies, stands at 93,955.
The reason for the crude oil losses across the lake can also be attributed to the resumption of production in Libya, as the country begins to expand its production / export capacity after several months of blockade.
On the contrary, Saudi Arabia and Russia have indicated their willingness to extend their oil production cuts and postpone planned increases when they meet with OPEC + partners at the end of November, which could help limit deeper losses in oil prices. Looking to the future, market traders are monitoring the movement of the USD amid the lack of major data / events. In addition, risk catalysts such as geopolitics and viruses, not to forget Brexit, are also key to keeping the fresh direction. Good luck!