Oil Declines Amid Concerns About Oil Demand RecoveryOil loses ground amid stronger U.S. dollar and increasing U.S. – China tensions.
Oil Video 07.08.20.
Surge In The Number Of New COVID-19 Cases In India And Stronger U.S. Dollar Put Pressure On Oil
WTI oil has declined towards $41.50 amid worries that continued surge in the number of new coronavirus cases will put pressure on oil demand in absence of an effective vaccine.
India has become the world leader in the number of new cases, recording more than 62,000 cases on Thursday.
With a population of almost 1.4 billion, India is the world’s second most populated country and the world’s third biggest oil consumer.
As many Indians live in poverty and have restricted access to healthcare, the pandemic has the potential to reach truly scary numbers in the country.
For the oil market, this situation brings fears of new virus containment measures in India which will pressure economic activity and lead to lower demand for oil.
Another reason for today’s oil price downside is the rebound of the U.S. dollar. After testing lows at 92.50 on Thursday, the U.S. Dollar Index gained upside momentum and is trying to settle above 93.50.
Stronger U.S. dollar typically puts pressure on commodities as it makes them more expensive for buyers who have other currencies.
The U.S. dollar has lost a lot of ground in July and has the potential to rebound further so oil traders should watch the U.S. Dollar Index closely.
U.S. Increases Pressure On China
U.S. has decided to ban U.S. transactions with operators of China’s TikTok and WeChat, marking another low in U.S. – China relations.
In addition, the U.S. has just imposed sanctions on Hong Kong Chief Executive Carrie Lam and some other officials.
It is obvious that the next phase of the trade deal between U.S. and China is completely impossible in current circumstances. More, the markets may start to evaluate risks of a collapse of the current trade deal.
With so many near-term factors playing against oil, it needs continued decline in crude inventories for additional upside.
The market is still bullish since every oil’s dip was quickly bought in the last few months, but the mood may change quickly in case the situation on the coronavirus front deteriorates further or U.S. and China engage in a damaging trade and sanctions war.
For a look at all of today’s economic events, check out our economic calendar.