0305 GMT: Crude oil futures were steady during mid-morning Asian trade April 9, finding support in a weakening US dollar even as lingering demand concerns, amid resurgent waves of COVID-19, continue to weigh on market sentiment.
At 11.05 am Singapore time (0234 GMT), the ICE Brent June contract slipped 5 cents/b (0.08%) from the April 8 settle at $63.15/b, while the May NYMEX light sweet crude contract was up 11 cents/b (0.18%) at $59.71/b."Crude prices are struggling for direction as short-term COVID pressures are countered by a much weaker US dollar," Edward Moya, senior market analyst at OANDA, said in an April 9 note.
The US dollar Index, which measures the US dollar against a trade-weighted basket of six major currencies, slid 0.44% to 92.069 on April 8 and continued to move in a range during mid-morning trade April 9 to stand at 92.155 at 11.05 am Singapore time, the lowest since it settled at 91.741 on March 22.
Markets were also reassured by the US Federal Reserve Chair's remarks at an International Monetary Fund event, where it was reiterated that the loose monetary policy will continue for some time, which will remain supportive of the nation's demand recovery.
"In a nutshell, the Fed will want to see many months of consistent and substantial improvement in the labor market and inflation before thinking about withdrawing stimulus," analysts at ANZ Research said in an April 9 note.
Outside the US, however, rising COVID-19 cases in several parts of Asia, Europe and Latin America, as well as Canada, are resulting in demand-side risks that are capping optimism in the market.
Many of the countries struggling with resurgences are opting for new, or extended lockdowns, that may curb near-term demand and delay the trajectory of economic recovery, according to analysts.
"Traders [are trying] to make sense of the mixed economic backdrop against positive underlying fundamentals...Rising infections and renewed lockdowns are also raising concerns," ANZ Research analysts said.
Alongside near-term demand uncertainties, markets are also cautious about supply-side fundamentals after the surprise OPEC+ and Saudi Arabia announcement on April 1 to phase out production cuts gradually from May to July, as well as recent developments in US-Iran relations that may eventually result in the lifting of sanctions on Iranian crude.
"Markets have digested the OPEC move, and will likely be rangebound till the next big news," Warren Patterson, head of commodities strategies at ING told Platts on April 9. "The market will be watching nuclear talks between Iran and US, which resume today."
Relations between the two countries have thawed recently, with both considering initial indirect talks regarding a revival of a nuclear deal on April 6 to be constructive.
However, analysts note that Iranian crude exports have already increased this year despite the sanctions, which will cushion the impact of sanctions relief, should it materialize.
