The market opened in a fresh bout of violence on Monday, with crude oil futures extending last week’s brutal sell-off, which saw the market open down more than 5 percent before hitting its lowest level since November 2001. Gold edged lower to below $1,680, while the dollar remained firm. For the day, keep an eye on the progress of the additional stimulus package in the United States, after trump hinted that there might be an answer on Monday.
The latest outbreak: more than 760,000 cases in the us in the pipeline for a new $250 billion stimulus package?
As of 07:43 Beijing time on April 20, more than 760,000 COVID 19 cases had been confirmed in the U.S., with 763,594 cases and more than 40,000 deaths, bringing the total to 40,527, according to real-time data update website worldometers.
The US President Donald trump says he’s just finished a phone call with Treasury secretary Steven Mnuchin. Close to an agreement on additional stimulus, talks with Democrats could produce a “good” outcome tomorrow, perhaps with an answer on Monday. He also said the outbreak underscored the need for the U.S. to keep its supply chain at home.
Congress set up the program last month as part of the $2.3 trillion COVID 19 epidemic economic rescue plan, but the money has run out. U.S. President Donald Trump has called for a $250 billion increase in the small-business lending program, in a standoff that has lasted more than a week, Reuters reported.
Democratic leaders in congress and Treasury secretary Steven mnuchin said April 19 they are close to a deal to fund a program to help small businesses combat COVID 19.
Both Democrats and Mr Mnuchin said they hoped to reach a deal in time for senate consideration early this week. The agreement will mark the latest step in the us government’s comprehensive response to the aftermath of COVID 19.
“I hope we can reach an agreement that will be passed by the senate tomorrow and by the house Tuesday,” Mr Mnuchin said yesterday. But later in the day, aides said it would take time to complete the deal, and it was not clear when a vote would take place in either the senate or the house.
House majority leader steny hoyer said the house would meet on Wednesday to discuss the bailout loan plan.
Trump also said he would use the defense production act to obtain throat swab test kits, and told reporters he could soon reach a deal to have a manufacturer retrofit a factory to produce swabs used in a novel coronavirus test.
Recently, the Atlantic monthly published an article that the positive rate of novel coronavirus detection in the United States is too high, and the official count of COVID 19 cases may only be the “tip of the iceberg” of the actual number of infected people. According to the COVID 19 tracking project sponsored by the Atlantic monthly, about 697,000 of the 3.57 million people tested in the United States were positive as of 3 am edt on April 18, or 1 in 5 people tested for novel coronavirus nucleic acid, with a positive detection rate of 20%.
The opening crash! Crude just missed the $17 mark…
Oil bulls’ nightmare is far from over after last week’s nearly 20 percent plunge.
At the start of trading in Asia on Monday, WTI crude futures quickly extended losses to more than 5 percent to their lowest level since November 2001, according to Reuters quotes, before deepening losses and falling 7 percent to lose the key $17 level.
After five straight days of losses last week, U.S. crude was hit by a wild attack on Friday, with prices briefly falling below the $18 mark and as low as $17.26, a 19-year low.
Oil prices continue to slide in the sub-sector and are now at a nearly 20-year low. An agreement among the biggest oil producers to cut output had little impact on the disruption to demand from covid19, and traders are increasingly worried that crude will soon lose storage space.
“One might have expected this unprecedented cut to lead to a jump in oil prices,” abn amro said in a report. But that didn’t happen.” The bank said the market had already priced in that factor after U.S. President Donald trump said he expected a deal in early April.
“There continue to be concerns that us storage facilities will run out of capacity,” ANZ research said in a report. Since the beginning of march, stocks at Cushing, the pricing point for wti, have risen nearly 50 per cent.”
The U.S. last week reported its largest ever crude oil stockpile, at 19 million barrels, because of overcapacity. At present, oil drilling platforms, drilling RIGS and other related industrial chains in the United States are taking the way of trimming production to overcome the market crisis of unbalanced supply and demand.
Meanwhile, oil futures investors have been unwinding their long may positions as U.S. inventories surge to record highs and storage facilities run out this summer. Storage tanks in Cushing, Oklahoma, are 69% full, up from 49% four weeks ago, according to the energy department.
In addition, futures prices for WTI crude are already well above spot market prices, a condition known as contango, which encourages traders to stockpile oil.
“Brent is a water based crude and not subject to storage constraints like WTI Cushing intermediate or WTI midland,” said David Winans, head of us investment grade credit research at PGIM fixed income. “WTI is an inland crude with less storage, so the closer you get to the top of the tank, the lower the near-term price of WTI will be.”
The price of crude oil in the us oil capital is dangerously close to zero, with buyers in Texas bidding as low as $2 a barrel for some of the flow, raising the prospect that oil producers may soon have to pay customers to take it out of their hands.
Inventories at the New York mercantile exchange’s crude delivery center in Cushing, okla., are at 55 million barrels, according to Rabobank commodity strategist Ryan Fitzmaurice. He added that while operating capacity was “said to be just under 92m b/d, the all-time high was 69m b/d in April 2017.”
“We are 14 million barrels away from a new record and 37 million barrels away from peak capacity,” Fitzmaurice said. At the current rate of about five million barrels a week, Cushing’s crude stocks will be full in less than two months.”
Michael Lynch, President of Strategic Energy & Economic Research, told MarketWatch, “the historical contango reflects the difficulty of finding a buyer for physical crude and the fact that it is being sold at a low price. That means the inventory could be fuller than expected, or the buyer could expect it to be sooner rather than later.”
Notably, Texas oil regulators are now expected to meet again on April 21 to discuss the possibility of a 20% or roughly 1 million BPD cut in Texas output.
Spot gold fell under pressure during the day, now below $1,680, as crude oil plunged at the start of the day, as markets focused on the unfolding outbreak and the performance of U.S. jobs.
Spot gold rose before falling last week after hitting a more than seven-year high near $1,745. It plunged more than $30 on Friday, dipping below $1,680 at one point, before ending the week with a long shadow.
“Sentiment is a bigger driver than macro fundamentals. There is no doubt that the macroeconomic outlook is particularly favourable for gold at the moment. But I don’t think it’s going to get everyone’s attention until we get into the recovery phase, “said Everett Millman, a specialist on Coins at Gainesville.
Stephen Innes, chief market strategist at AxiCorp in New York, said on a technical level, if gold were to effectively break below the $1,700 / oz mark, it would trigger a stop loss and further decline.
Phillip Streible, chief market strategist at Blue Line Futures, said, “it feels like the current correction is a necessary correction. The key level to maintain is around $1,700.”
At one point, $1,704 was a key resistance level, Streible said. “So the new week you’re going to be looking at the $1,700 level. If it breaks $1,750, $1,800 could be the next target.”
ABN Amro strategist Georgette Boele said improving investor sentiment and a lot of easing in the market, combined with very low-interest rates and fiscal stimulus, could push gold higher. “While there are clearly bullish factors in the gold market, there is not going to be a big immediate rally.”