During an early Asian trading session on Friday, WTI crude oil prices managed to expand their gains the day before, staying like bulls well above the level of about $ 40.00, as strong U.S. economic data boosted hopes for a U.S. economic recovery. u. This seeks to support fuel demand and contribute to rising crude oil prices. Moreover, sentiment around crude improved further on Thursday, after the Energy Information Administration reported a drop in crude oil inventories by 1 million barrels for the week ending October 16th. On the other hand, gains in crude oil prices can also be attributed to optimism about the U.S. fiscal package, which maintains a positive market trade sentiment and provides support for crude oil prices.
In contrast, the strength of the broad-based U.S. dollar, backed by optimistic U.S. data, has become a key factor limiting any further momentum for crude oil prices. In addition, crude oil profits are further constrained by continued production growth in Libya, which is now expected to produce more than 500,000 barrels per day, from barely 100,000 barrels per day. Across the pond, fears of geopolitical tensions between the U.S., Russia and Iran continue to provoke crude oil bulls. Furthermore, the number of coronavirus cases is increasing outside the European epicenter, raising doubts about the recovery of global fuel demand. This has become a key factor that keeps any additional gains in crude oil prices. WTI crude oil is currently trading at 40.64 and is consolidating in the range between 39.71 and 41.01.
Despite fears of a Brexit without an agreement and geopolitical tensions between the US and Russia, not to forget the record monthly rise in COVID-19 cases in the US, market sentiment spread its positive tone earlier in the day, thanks to better-than-expected US announcements. initial weekly unemployment claims on Thursday, raising hopes for the U.S. economic recovery and supporting crude oil prices. In terms of data, the number of Americans who first applied for unemployment insurance fell to 787,000 last week, according to data released by the U.S. Department of Labor (DOL). However, the figures were well below the expected 860,000, and the figures from the previous month were also revised to 842,000 from the previously reported 898,000.
In addition, the reasons for the mood in the risky market can be attributed to developments related to the US fiscal stimulus. It should be noted that House Speaker Nancy Pelosi says an agreement needs to be reached. Meanwhile, the Democratic leader also said progress has been made on the stimulus package. I remind you that Democrats and Republicans have been arguing over a package worth about $ 2 trillion, designed to support the economy’s recovery from the coronavirus crisis. However, positive developments regarding U.S. fiscal stimulus tend to reinforce the sentiment with respect to crude oil prices.
Despite a sense of risk, the broad-based U.S. dollar managed to expand its gains from the previous session, taking further offers during the early Asian session, due to strong data from the U.S. economy. This boosted hopes for a recovery in the U.S. economy and supported the U.S. dollar. However, the gain on the U.S. dollar has become a key factor that has kept any further growth in crude oil prices, as the price of oil is inversely related to the price of the U.S. dollar. Meanwhile, the dollar index, which tracks the return of money against a basket of other currencies, rose 0.4%, to 92.97, after reaching its lowest level of 92.46 a week on Wednesday.
By the way, gains on crude oil are limited by the constant differences between the UK and the European Union (EU), in terms of thorny issues such as fisheries and a level playing field. In addition, fears of geopolitical tensions between the U.S., Russia, and Iran have also played a major role in limiting oil price growth.
Moreover, mixed sentiments about crude oil prices could also be linked to renewed locking restrictions, in an effort to stem a second wave of coronavirus, which ultimately raised concerns about a slower recovery in fuel demand, leading to limited gains in oil prices. According to the latest report from Johns Hopkins University, approximately half of U.S. states register monthly records regarding new cases. Meanwhile, the Australian state of Victoria has also recorded a large number of new infections, knocking down an average of 14 days.
Looking forward, market traders will keep an eye on the movement of the dollar due to the lack of major data / events that day. However, the final presidential debate between President Donald Trump and his Democratic rival Joe Biden will be crucial to watch. Furthermore, risk catalysts, such as geopolitics and the coronavirus problem, not to mention Brexit, have not lost any significance. Good luck!
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