After four days of marathon talks, OPEC + announced on Sunday that it would cut output by 9.7 million barrels per day (BPD). Spot gold rebounded back above $1,690 on Monday, closing in on a key $1,700 resistance level that could be challenged this week. In addition, the market continues to focus on the development of the global epidemic. The United States has become the country with the most confirmed and dead cases in the world, and President Trump still hopes to ease the epidemic prevention measures as soon as possible to get the economy back to normal operation.
Latest outbreak: more than 560,000 cases have been confirmed in the United States. Mr Trump wants to restart the economy
Statistics from real-time data update website world meters show that as of 08:12 Beijing time on April 13, the global cumulative number of confirmed COVID 19 cases has exceeded 1.85 million, with 1,851,734 cases now confirmed and 114,179 cases of 110,000 deaths.
Among them, the total number of confirmed COVID 19 cases in the United States exceeded 560,000, with 560,402 cases, and the total number of deaths exceeded 22,000, reaching 22,105, making it the country with the most confirmed and fatal cases in the world.
Despite this, U.S. President Donald Trump still hopes to ease quarantine measures as soon as possible to get the economy back on track.
“People want to get back to work,” trump told fox news on Saturday. We have to get the country back on track.”
Mr. Trump said he would decide whether to reopen the economy on the advice of “a lot of smart people”, including professionals, doctors and business leaders, as well as his “gut instinct”. He also said a decision would be made fairly quickly.
In addition, the director of the national institute of allergy and infectious diseases, mark Fauci, said parts of the country could be ready to ease their defenses by may. “It could start in some ways next month,” he told CNN on Sunday.
Still, Minneapolis fed President Neel Kashkari said Sunday that the U.S. economy’s recovery from the ravages of the new epidemic could be a ‘long and difficult road,’ with parts of the economy periodically shutting down and restarting.
In an interview with CBS’s Face the Nation, kashkari said predictions of a rapid economic turnaround were too optimistic unless treatment for COVID 19 was available in the coming months.
“It is likely to be a long and difficult road until an effective treatment or vaccine is available,” he said. “I think it is very difficult to see a v-shaped recovery in this situation.”
Yale University economist and Nobel laureate Robert Shiller warned that fears of a COVID 19 pandemic could send the U.S. economy into an undeserved depression.
Although he sees few parallels between the 1930s and today, Shiller admits that the recession caused by COVID 19 will be severe. That could mean more bad news for a job market that has seen record losses. “The job market is more difficult than the stock market,” he said. The unemployment rate tended to rise before gradually falling. It could take years for employment to fully recover. “
The biggest production cut in history! Oil prices may continue to suffer in the short term
After four days of marathon discussions, OPEC and its allies agreed to cut their oil output by 9.7 million barrels a day.
WTI crude futures jumped as much as 8% in the first few minutes of trading after news of the cuts, while brent crude rose more than 5% at one point before turning lower. U.S. and U.S. oil futures continued to recover after the announcement, both rising more than 3 percent.
WTI crude futures extended gains again to 5 percent at $23.90 a barrel, according to the latest Reuters quote. Brent crude futures were up 3.24% at $32.50 a barrel.
OPEC initially offered to cut output by 10m barrels a day, or 10 per cent of the world’s supply, but Mexico blocked a final deal by objecting to the amount demanded. Under the new agreement, Mexico will cut output by 100,000 barrels a day, instead of the original 400,000 b/d.
The statement of the OPEC-plus-supply agreement said it would cut output by 9.7 million barrels per day for two months from May 1, 2020. It will cut output by 7.7 million b/d by July 1, 2020, and December. Planned output cuts of 5.8 million b/d from January 2021 to April 2022; Production will be cut from the October 2018 benchmark, with Saudi Arabia and Russia both expected to cut at 11 million BPD.
The agreement will expire on April 30, 2022, but an extension will be evaluated in December 2021, the statement said. OPEC will hold a video conference on June 10, 2020, to determine further action to balance the oil market.
Ed Morse, Citigroup’s global head of commodities, said the cuts would have a significant impact in the second half of the year and push oil prices to around $40 by the end of the year, but there would be a pain in the short term as markets rebalance.
“It is too late to stop a very large inventory build-up of more than 1bn barrels between mid-march and the end of May and to stop spot prices falling into single digits,” he said.
John Kilduff, of Again Capital, said: “production cuts may help, but market conditions remain negative for producers, especially in the short term. Oil prices are likely to fall further as global crude inventories rise. The $20 level could be tested again in the coming weeks.”
Andy Lipow, president of Lipow Oil Associates LLC in the Houston area, said the OPEC + cut was smaller than expected because Mexico was able to get out of the cut easily. The outlook for the oil market is tough, given that the market is highly skeptical that Opec + will really be able to meet its target of nearly 10m b/d of output cuts.
Goldman Sachs points out that the OPEC + deal is historic, but the cuts are insufficient. Oil prices are expected to fall further in the coming weeks as Opec + crude supplies are expected to drop by 4.3 million b/d from the first-quarter production.
Gold returns to 1690 this week to test 1700?
Gold prices rose more than 4% last week to climb back above $1,680. On Monday, April 13, in early Asian trading, gold prices continued to rally above $1,690. It is expected to pass the 1700 mark this week.
Last week, the fed stepped up its emergency response with a wide-ranging $2.3 trillion rescue plan. Fed chairman Colin Powell said he would continue to use all available tools until the U.S. economy began a full recovery from the virus outbreak.
Fed chairman colin Powell said he will continue to use all available tools until the U.S. economy begins to fully recover from the effects of the new epidemic, but acknowledged the limits of the central bank’s ability.
The dollar lost ground after the federal reserve cut interest rates to near zero, restarted quantitative easing and increased the supply of dollars to avoid a liquidity shortage in money markets.
Junichi Ishikawa, the senior currency strategist at IG Securities, said: “the fed did a lot of different things, but the end result was a surge in the supply of dollars. The good news about the virus helped reduce the stampede back to the dollar earlier this year. The net result is a gradual decline in the dollar.”
Gold has been a strong performer lately as the dollar has been held back and is on track for a further challenge of 1700 this week. Analysts say more gains are coming, and they still believe the uncertainty surrounding COVID-19 will be the dominant factor, helping gold prices.
Futures chief market strategist Phillip Streible expects gold to average $1,750 in the second quarter, $1,850 in the third and $2,000 in the fourth.
“The fed’s tools are fairly limited and it looks like inflation will be allowed to continue, which is a big deal for gold in the long term,” Streible said. The fed says it is not worried about inflation. That really opened the floodgates for gold. I think gold will look better in the next few quarters.”
Bart Melek, head of global strategy at td securities, has a short-term target of $1,800 and eventually $2,000.
“It’s not going to happen overnight. But we are more likely to go to the $2,000 level. I have to say we are getting close to my short-term goal of $1,800, “he said. “It will be very difficult to break through $1,800 in the second quarter without a lack of economic activity that will put pressure on inflation.”
Standard chartered bank analyst Suki Cooper also expects further gains in the short term, forecasting an average of $1,725 in the second quarter.
“Spot gold has started to consolidate around $1,650 an ounce, but the macro environment is still favorable for further gains,” Cooper said. “Unprecedented monetary and fiscal stimulus, negative-yielding debt and an extended period of low-interest rates mean gold will continue to attract investors to the safety and quality of assets.”