WTI on the backfoot, barely holding $41 as bearish fundamentals kicking-in

The price of a barrel of oil is trading at $41.03 in a 41.02/22 range in Asia, wilting away following a sour close on Wall Street. 

Trade wars, coronavirus spread, real yields under pressure and prospects of a prolonged global recession as the US consumption dries up is weighing on the demand side of the oil market. 

This all falls in to play a day after EIA data showed gasoline demand was weakening and just as prices were set on breaking to the highest levels since the pandemic. 

Sino/US tensions flaring up

Sino/US relations have not been as worse since before a trade deal agreement had finally been made at the end of 2019. 

The latest provocations made during this week has antagonised what is now becoming a three-year-long trade spat between the two nations. 

There is more on what could weigh on risk sentiment in the markets into the end on this week here: Expelling US consular spies an option for China – GT analysts

Economic recovery faltering

Meanwhile, crude oil prices fell amid rising concerns the economic recovery was faltering.

A bigger than expected jobless claims number saw equity markets sell-off sharply, dragging risk assets lower. Continuing claims for the prior week also fell more than expected.

Also, there is little hope that there is going to be a stimulus package delivered before the deadline: US stimulus delayed as Republican talks fall into disarray – FT

A surge in the number of coronavirus cases

Added to that a surge in the number of coronavirus cases and the outlook for crude oil demand in the US has turned decidedly bearish in recent weeks.

Hospitals in Florida had no available beds in intensive care units, US cases accelerate

Notwithstanding, the latest EIA report implied some weakness in gasoline demand — which lends strength to the view that US energy demand could falter amid a rising contagion in key states, analysts at TD Securities explained. 

Overall, the evidence suggests that crude oil prices could remain range-bound for the time being.

Chinese fuel demand at risk

The market has also been keeping an eye on China, were severe flooding has potentially impacted fuel demand.

With refineries still pumping out huge amounts of gasoline, there are fears exports may start to rise,

analysts at ANZ note today.

WTI levels