Strong U.S Dollar, COVID-19 Weighs on Oil Prices

Surprisingly, oil bulls are now losing the battle, on the basis recent price action reveals, Oil bears were taking a strong grip on the most liquid commodity derivative market despite recent data printing about 10-million barrel plunge in U.S crude stockpiles and falling inventories at the vital hub of Cushing.

At the time of drafting this report, the U.S based oil contract, West Texas Intermediate futures slid about 0.8% as negative bias rippled through global financial markets after the U.S Central Bank indicated that the central bank was nowhere near stopping its expansive approach for the world’s biggest economy.

A stronger greenback also weighed on the black liquid hydrocarbon taking to consideration oil traders took their profits off the table on sighting the surging U.S dollar (major commodities like oil is priced in the U.S dollar).

Oil bears kept the wagon on, taking into account the world’s largest importer of oil (China) is now feeling the impact of the global Covid-19 outbreak meaning oil traders are nervy that such macro could crimp fuel consumption at such important market.

In addition, China’s road and flight travel has greatly reduced despite the Lunar New Year, which normally sees a seasonal boost in energy consumption, while traffic in an important economic hub in the U.S (Los Angeles) dropped over the past month.

That said, Oil bulls are still in the equation, though its likely demand recovery will be uneven and longer time than expected, oil supply is shrinking faster than expected, as the Saudis and Russians, major key oil players curb production meaning Brent crude prices may rise past $70 a barrel by the end of 2021, according to JPMorgan Chase & Co.