Crude oil prices turn lower on a new record day for coronavirus cases

Crude oil prices are trading 2.5% lower today as the number of new COVID-19 cases hits a new daily record. Prices of the black gold rose this week due to a weak US dollar, but the gains got capped quickly.

Fundamental analysis: Weak dollar and a steep drop in U.S. crude inventories helping oil 

The broad dollar weakness helped crude oil prices to print levels above $42 for the first time since the plunge in March. However, the gains culminated over a constant increase in new COVID-19 cases. 

“The virus is spreading like wildfire across the Americas while Europe and Asia are displaying worrying signs of a second surge in cases,” said Stephen Brennock of oil brokerage PVM.

Investors shift funds away from dollar to dollar-priced commodities due to their drop in price amid weaker USD. 

“Genuine price support comes from the weak dollar, which helps physical oil demand,” said Tamas Varga, an analyst at PVM Oil Associates Ltd.

Moreover, tensions between the U.S. and China keep rising as the U.S. government ordered the closure of a Chinese consulate in Texas on allegations of spying, further increasing the market uncertainty. 

On the data front, U.S. crude oil inventories dropped by 10.6 million barrels to 526 million barrels last week, the IEA reported.

“The expectation is that the OPEC cuts are going to lead to bigger draws in the United States and this could be the beginning of it,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

A decrease in oil inventories was likely a result of supply cuts.

Technical analysis: Prices break lower

Crude oil price has broken the ascending wedge to trade over 2.5% lower on Thursday. Investors trading crude oil pushed the price action lower to break from a tight range formed in the past 2 weeks. 

The price got close but it never actually touched the 200-DMA that trades around the $43 mark. Prices are now heading lower towards the horizontal support at $35. The 100-DMA is turning higher to trade just above the $31 handle.

Summary

Prices of crude oil advanced amid the weaker dollar in July however, the gains hit the ceiling due to a constant increase in new coronavirus cases. Crude oil prices are trading 2.5% lower today as the sellers try to force a first daily close below $40 in two weeks.