Oil prices continued to come under pressure on Tuesday after Monday’s carnage, with WTI crude falling more than 6% to $12 and analysts warning that the June contract was still at risk of falling below $0. Meanwhile, gold fell in tandem with the dollar, again losing its 1710 mark, as hopes that the blockade was about to be eased boosted risk appetite. This trading day, focus on the u. s. earnings performance.
The price of oil has collapsed again! It’s the culprit again…
Asian city on Tuesday, the price of crude oil prices again low trend. WTI crude briefly fell below $12 a barrel, falling more than 6 percent on the day, while brent crude fell 3 percent, still trading below $20 a barrel.
The price of U.S. crude oil’s June contract fell 25 percent last day, sending jittery investors fleeing the benchmark U.S. crude futures as they ran out of storage space to absorb the glut caused by a new-outbreak collapse in demand. Meanwhile, brent crude fell below $20 a barrel on Monday,
While governments around the world are taking tentative steps to ease restrictions on movement to help economies recover, demand for fuel oil remains weak.
Global fuel oil demand is down 30 per cent and storage space is becoming increasingly valuable, with about 85 per cent of global onshore storage having peaked as of last week, according to Kpler.
Cushing, Oklahoma, is an important storage centre for us shale oil, but there is a severe shortage of available reserves, putting particular pressure on us prices.
Oil production has started to decline because of the fall in oil prices. In the week ended April 24, drillers cut 60 active oil RIGS, bringing the total to 378, the lowest level since July 2016, according to a regular report released on Friday by Baker Hughes, the energy services company.
Saudi Arabia is also reported to be cutting production ahead of schedule, with Opec and other producers set to start cutting production on May 1. But analysts say these cuts are not enough to make up for the huge impact on oil consumption caused by efforts to prevent the spread of Covid-19.
“A key question is whether we can see a repeat of negative oil prices when the contract expires next June,” ing strategists Warren Patterson and Wenyu Yao said earlier. “Given the oversupply environment, inventories are likely to be a bigger problem this time next month, so in the absence of a significant recovery in demand, crude oil futures are likely to be negative again in June.”
Traders also said the drop in crude oil futures contracts was partly due to retail investment vehicles such as exchange traded funds shifting their investments out of the front-month June contract to avoid being locked in as they were a week ago, when the contract fell to -$37.63.
Oil prices fell sharply again on Monday when the United States Oil Fund, the world’s largest Oil ETF, said it would sell all its crude futures contracts for delivery in June — 20 per cent of its $3.6bn portfolio — within four days.
Cailin Birc, global economist at the economist intelligence unit, said: “the USO filing undermined the oil market’s confidence in the June contract and led to a sharp drop in oil prices today. However, this will not change the economic outlook for June, as it is certainly difficult. “
Giovanni Staunovo, commodities analyst at UBS, said: “by selling shorter-term futures and investing in longer-term contracts, they are putting pressure on the front-month contract at WTI.”
Some analysts said restricting trading in short-term futures contracts would do little to reduce turmoil in the us crude market.
“Brokers’ restrictions on trading in the oil futures world tend to reduce liquidity and can exacerbate volatility,” said Paul Sankey, managing director at Mizuho Securities.
Earlier, Sankey said in a new research note that market conditions could get worse in the coming month, with WTI crude falling to -$100.
Countries have started to unlock gold and dollar diving
More than 1 million cases of COVID 19 have been confirmed in the u.s., according to Worldometers’ real-time statistics, but the closure has been gradually unblocked in the U.S. and Europe.
Several U.S. states are understood to have begun easing restrictions on home ownership in an effort to jump-start the economy and put americans back to work after causing severe unemployment.
Forty-two of America’s 50 states have issued stoppages or home orders in the past few weeks. States such as Georgia, Oklahoma, Alaska and south Carolina have already begun to loosen their rules, while several states, including Tennessee, Mississippi, Montana, Minnesota and Colorado, are scheduled to do so on Monday.
The states where the ban has been lifted are concentrated in the mountain west, the south and the Midwest, where the outbreak is far less severe than in the northeast and where most of the governors are republicans, according to a Reuters analysis.
Oliver Pursche, an independent asset adviser, said: “overall, I think the governors are doing the right thing, being cautious and cautious.”
But he cautioned against expecting a quick “v-shaped” recovery. “If we start to restart the economy tomorrow and there is no second wave of large-scale infections, I still think it will take at least six to 12 months to get things back to normal. It’s much easier to press the pause button on the economy than it is to press the start button.”
In Europe, Italy, one of the countries hardest hit by the outbreak, will allow factories and construction sites to return to work from May 4.
The Spanish government says it will consider further deregulation to allow adults to exercise alone in the near future if the decline can be sustained. Children under the age of 14 can walk outdoors with an adult for the first time in six weeks.
The Swiss government has announced that it will gradually relax its epidemic control measures in stages, allowing barbershops, flower shops and building materials markets to operate as well as non-emergency departments and dental clinics in hospitals and clinics from April 27.
The dollar index briefly fell below the 100 mark and continued to hover around that level on Tuesday as countries developed plans to ease restrictions on the outbreak, boosting risk appetite and reducing safe-haven demand for the greenback.
Win Thin, global head of currency strategy at Brown Brothers Harriman in New York, said: “the reopening programme has opened the week with positive sentiment. The dollar is under some pressure.”
Gold also sold off as the risk returned, with spot gold falling as low as $1,704 in early trading before falling back to $1,710 in Asian trading on Tuesday.
“While the broader macro backdrop remains supportive for gold in the short term, they are most focused on real yields. Treasury yields were higher on Monday morning, which weighed on gold, “said standard chartered bank analyst Suki Cooper.
Still, the unprecedented stimulus by governments and central Banks has provided potential support for gold.
“Even if the blockade is lifted, the world is still far from returning to normal,” analysts at Commerzbank wrote in a report. The bigger risk would be economic collapse. To deal with this, governments around the world are likely to continue to pour unprecedented amounts of money, much of it from central Banks. In this environment, gold as a crisis currency should continue to maintain demand, as reflected by the steady flow of money coming in from exchange-traded funds.”