WTI Fails to extend its Bullish Bias of the Previous Day – A Combination of Factors in Play!

During Friday’s early Asian trading session, the WTI Crude Oil prices failed to extend the recovery rally of the previous day, remaining depressed below the $ 38.50 level, mainly due to the continued rise in COVID-19 cases across Europe and the US, which fueled fears of a slump in demand, due to the imposition of new restrictions on economic and social activities. Apart from this, the heavy losses in the crude oil prices could also be attributed to the cautious sentiment surrounding the 2020 elections in the US, as they are not close to any decision yet.

This is because of President Donald Trump’s lawsuits against multiple states, which is resulting in increased political uncertainly in the United States. Meanwhile, the bearish sentiment surrounding the crude oil prices was further bolstered after the Federal Reserve left rates unchanged, stating that the pace of recovery has declined. Thus, the political uncertainty in America and the dovish comments by Federal Reserve Chairman Jerome Powell also weighed on the crude oil prices. On the contrary, the larger-than-expected decline in US crude oil supplies reported by the Energy Information Administration (EIA) could be considered one of the key factors helping to limit deeper losses in the crude oil prices. At the moment, crude oil is trading at $ 38.17, and consolidating in the range between 38.03 and 38.59.

As we have already mentioned, the intensifying market concerns over the continuous surge in new coronavirus cases in Europe and the United States keeps fueling doubts over global economic recovery, due to the implementation of new restrictions on economic and social activities, which has sparked fears of further drops in demand and undermined the crude oil prices. As per the latest report, there were 109,000 new COVID-19 cases in the US yesterday. Thus, these figures marked the second day in a row with over 100,000 new cases, after Wednesday’s daily record was beaten.

Across the ocean, the hostile US presidential election has damaged hopes for a large stimulus to support the economy, as investors speculate that Democrat Joe Biden will be the next president. However, as it appears that the Republicans will retain the control of the Senate, it will be difficult for the Democrats to pass larger fiscal spending measures. This, in turn, weighed on the investor sentiment, which was evident from a fresh leg down in the equity markets, underpinning the safe-haven US dollar.

On the contrary, the larger-than-expected decline in US crude oil supplies reported by the Energy Information Administration (EIA) could be considered one of the key factors that is helping to limit deeper losses in crude. It is worth recalling that the WTI Crude Oil inventories dropped by 7.99 million barrels, against expectations for a build of 890,000 barrels, as per the Energy Information Administration report.

Moving ahead, the market traders will keep their eyes on the American employment numbers for October, USD price dynamics and coronavirus headlines, which could all give fresh direction for the crude oil prices. In the meantime, the updates surrounding the US elections will not lose any significance on the day. Good luck!