Crude oil futures steady to higher on a weaker US dollar

Singapore — 0305 GMT: Crude oil futures were steady to higher during mid-morning trade in Asia July 28 as a weaker US dollar boosted risk appetites and provide support for the global crude complex.

NYMEX September WTI settled up 31 cents at $41.60/b, and ICE September Brent was up 7 cents on the day at $43.41/b.

At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures was up 19 cents/b (0.44%) from the July 27 settle to $43.60/b, while the NYMEX September light sweet crude contract was up by 6 cents/b (0.14%) at $41.66/b. The US Dollar Index was at 93.64, down 0.02% from the close of the US trading session.

The weaker US dollar is trading below the 94.0 level, its lowest since May 2018, continuing to boost investor appetite for risk assets, such as crude oil.

With an upcoming Federal Open Market Committee meeting on July 28 and 29 where Federal Reserve chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the US dollar is likely to continue, keeping oil prices buoyant.

"Oil markets are receiving support from expectations of the FOMC's firmer commitment in the upcoming policy meeting towards allowing above-target inflation to occur for some time, which should be viewed as incredibly positive for risk assets. And oil prices will continue to draw support from the Fed's dovish policy, which sees the US dollar move lower," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 28.

Meanwhile, the US' Senate Majority Leader McConnell had formally announced details of a newly proposed trillion-dollar fiscal stimulus package on July 27, which will provide most Americans with a one-time, $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current $600 to about $200 a week, according to media reports.

Negotiations over the final details of the fiscal stimulus package will ensue just as the weekly $600 unemployment benefits from the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act expires.

However, rising geopolitical tensions between the US and China, amid an uncertain economic backdrop will continue to limit gains, keeping Brent crude futures trading within the familiar $40-$45/b range.

"For oil prices to break out higher, there must be a significant flattening of the US Sunbelt CV-19 case count curve at a minimum," Innes added.

While the number of daily new infections in US has come off considerably from a record high 77,300 on July 16 to 55,000 on July 26, according to the latest John Hopkins University data, the number remains significantly higher than the daily infection rates in other major economies, even as many US states paused or reversed reopening plans.

Market participants will look for fresh cues from the inventory reports by the American Petroleum Institute and the Energy Information Administration on July 28 and 29, respectively.