Morning Briefing: WTI oil price dropped below zero for the first time ever

Posted on April 21, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices had their worst day in history on Monday, as the WTI futures for May delivery collapsed to negative $37 per barrel or down by 300% ahead of its expiry later today. It was the first time that an oil future contract turned negative, highlighting just how much demand has collapsed due to the pandemic. However, the more actively traded June oil contract rebounded by 5% at $22 per barrel, which is giving a better reflection of the reality in the oil market.

Coronavirus Update:

Global cases: More than 2.4 million
Global deaths: More than 169,986
Most cases reported: United States (784,326), Spain (200,210), Italy (181,228), France (156,480), and Germany (147,065).

WTI collapsed to -37$, its worst day in history

It was the first time in history that a crude oil future contract dropped into the negative territory. The May WTI delivery contract fell as much as 300% last night to settle at $37.63 per barrel. However, the international benchmark, Brent crude, fell only 8% at $25.57 per barrel, as it had already rolled to the June contract.

*Fig. 1: Brent crude price, Daily chart*

The negative prices mean that the oil producers would pay traders to take the barrels off their hands as the physical demand has already collapsed due to the pandemic combined with non-available storage capacity in the USA.

Global Equities: US markets fell 2% following the crude oil plunge

The US stock markets fell 2% on Monday following the plunge of crude prices into negative territory. Furthermore, the sentiment deteriorated after the Senate failed to reach a deal on the next package to rescue an economy and health care system ravaged by the global pandemic. However, a vote is set up as soon as Tuesday afternoon.

US futures fell 1% in the early European session, extending their overnight losses after President Trump tweeted that “he would sign an executive order to temporarily suspend immigration to the United States to protect jobs “in light of the attack from the Invisible Enemy.” Millions of Americans have filed for unemployment benefits as the coronavirus pandemic shuts down economic activity in much of the country”. The Dow Jones futures are pointing to an opening near 23.420.

Asian Pacific stock markets dropped 2% this morning on risk aversion sentiment after unconfirmed reports saying that the North Korean leader Kim Jong Un is in grave danger after undergoing a cardiovascular procedure.

Forex Market: US dollar and Yen higher on safety flows

The US dollar and the Japanese Yen were stronger across the board yesterday on safe haven bids. Both currencies have also received support this morning on concerns about the health of the North Korean leader.

The DXY-dollar index broke higher from the key resistance level of 100, as the EUR/USD softened towards 1.082, while the USD/JPY

Crude oil-sensitive Canadian dollar was hit hard yesterday on the back of the aggressive sell-off in the crude market. The USD/CAD price climbed near 1.41 as the Canadian oil sand companies have been exposed in the low crude prices, pushing many of them into bankruptcy.

Economic Calendar for April 21, 2020 (GMT+ 3:00):

Morning Briefing: WTI oil price collapsed below $15 for first time in 21 years

Posted on April 20, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices extended their massive losses by falling another 20% this morning on lower demand and US storage filling concerns. WTI oil price collapsed below $15 per barrel for the first time since 1999, while Brent crude fell 4% at $27.

Coronavirus Update:

Global cases: More than 2.39 million
Global deaths: More than 164,900
Most cases reported: United States (755,533), Spain (196,664), Italy (178,972), France (154,097), and Germany (145,184).

Crude oil: WTI oil price collapsed at $15, its lowest since 1999

WTI crude oil price fell by as much as 20% this morning, breaking below $15 per barrel, on its lowest level since 1999.

*Fig.1, WTI crude oil price, Monthly chart*

The plunged in the oil prices created a historic deep “Contango” phenomenon where the front-month May WTI contract (CLc1) was down by 19%, to $14.90 a barrel by 09:30 GMT+3 time, much lower than the next month’s contracts (higher forward curve) due to lower demand on the physical spot market. The investors are selling the front month contract May WTI contract to jump to the June’s WTI contract which is pricing near $23 per barrel or down by 6% due to the impending expiration of the May futures contract.

Crude oil markets have been experiencing an unprecedented fall in the global oil demand by as much as 30 million barrels per day or 30% of global oil consumption amid the pandemic outbreak and the ongoing lockdown measures to contain the virus.

The lower demand combined with the oversupply of cheap barrels of oil from Shale producers, OPEC, Saudi Arabia and Russia have put a real pressure on the global storage capacity. Energy analysts expect the excess storage capacity would be filled-up in the next 1-2 months based on the current demand-supply imbalance.

The recent OPEC+ historic agreement to cut production by 9.7 million barrels per day, was not large enough to offset a severe plunge in oil demand by 30 mbpd.

Global Equities: US markets rallied on Friday on hopes for virus treatment

The US markets rallied 3% on Friday after reports that a drug showed effectiveness in treating the coronavirus. The S&P 500 at 2.875, up 2.7% while Dow Jones index settled at 24.242 or +3% after Boing share jumped 15% after the airplane maker said it would resume production in the Seattle area as early as April 20.

*Fig.2, Nasdaq Composite index, Daily chart*

The Nasdaq index advanced 1.4% to 8.650 on Friday, concluding a weekly profit of 6%, on stronger demand for technology stocks such as Amazon and Netflix who closed with 15% weekly gains.

Asian Pacific markets fell on Monday as China cut its interest rates this morning. Chinese indices led the losses by 2% while Nikkei and Australian index followed with 1% loss.

Precious Metals: Gold lost 2% on improved risk sentiment

Gold prices dropped by 2% on Friday, falling to as lows as $1.675/oz on improved risk sentiment on the backdrop of stock market rally and the plans for re-opening of the US economy. Silver price lost 3%, to $15.20 while Palladium rose 3% to $2.200/oz this morning on supply concerns. Gold has lost more than 4% since it peaked last week on recession concerns and weaker US dollar.

Forex Market: US dollar stronger against energy currencies and Yuan

The DXY- dollar index rose by 0.2% on Monday morning, reaching the key resistance level of 100, after negative developments in energy market and lower interest rates.

*Fig. 3: DXY-dollar index, 1-hour chart*

The US dollar was stronger by 0.5% against commodity currencies such as Canadian and Australian dollars this morning. In addition, the greenback rallied by more than 1% against crude oil sensitive currencies such as Mexican Peso, Norwegian Crone and Russian Rubble amid the collapsing crude oil prices. The Chinese Yuan was weaker at 7.08 per dollar after the PBOC cut its benchmark lending rate by 20 basis points.

Economic Calendar for April 20, 2020 (GMT+ 3:00):

Morning Briefing: Global markets rallied on hopes for coronavirus drug treatment

Posted on April 17, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets surged by more than 2% on Friday morning after a report stating that a Gilead Sciences drug was showing effectiveness in treating the coronavirus. In addition, markets have also received support after President Trump released a three-phase process to reopen the US economy, finishing the pandemic lockdown.

Coronavirus drug trial:

Gilead Sciences shares popped by more than 16% in after-hours trading Thursday after details leaked of a closely watched clinical trial of the company’s antiviral drug Remdesivir, showing what appears to be promising results in treating Covid-19.

The University of Chicago’s phase 3 drug trial found that most of its patients had “rapid recoveries in fever and respiratory symptoms” and were discharged in less than a week, health-care publication STAT News reported.

The University of Chicago Medicine recruited 125 patients with the virus into Gilead’s two late-stage clinical trials, 113 of whom were severely ill. Gilead intends to enrol 4,000 people in its trials.

Coronavirus Update:

Global cases: More than 2.15 million
Global deaths: At least 144,243
Most cases reported: United States (671,331), Spain (184,948), Italy (168,941), France (147,091), and Germany (137,698).

Market Reaction:

US stock futures spiked by 2% on Friday morning on improved market sentiment and risk appetite on the positive news around the virus drug treatment. The Dow Jones futures were up by 2.2%, implying an opening near 24.400 level. With today’s gains, the US stock indices managed to gain more than 25% since they bottomed on March 23rd, supported from the strong fiscal and monetary policies.

Asian Pacific markets rallied by 3% this morning following the spike in the overnight US futures. The risk appetite sentiment continued even after China reported a massive cut by 6.8% for its first-quarter GDP in 2020. That was the first quarterly decline since 1992, when official quarterly GDP reports started.

Crude Oil:

Crude oil prices fell 1% on Thursday, trading near 18-years lows after OPEC group lowered its global oil demand forecast due to the “historic shock” delivered by the pandemic outbreak. WTI price closed just below $20 per barrel on while Brent settled near $28.

OPEC said in a monthly report it now expects global demand to contract by 6.9 million barrels per day (bpd), or 6.9%, in 2020, and noted the reduction may not be the last.

Precious Metals:

Safe-haven precious metals were hit hard this morning following market risk-on sentiment and stock market rally.

Gold price broke below $1.700/oz, currently trading near $1.688/oz retreating from its 8-year highs of $1.750/oz. Silver price led the losses by 3%, pricing near $15/oz level, losing almost $1/oz since Monday’s peak.

Forex Market:

The US dollar hit weekly highs against major currencies last night. The greenback received safe-haven bids, following the record low US consumer spending, manufacturing activity and unemployment data.

The DXY dollar index climbed near the 100 key resistance level while the EUR/USD broke below 1.09 after failing to surpass the 1.10 level on Wednesday.

The Australian and New Zealand dollars led gains against safe havens such as the Japanese Yen and US dollar, receiving support from the improved market sentiment and Asian stock market rally.

Economic Calendar for April 17, 2020 (GMT+ 3:00):

Morning Briefing: Global markets fell on gloomy US consumer spending

Posted on April 16, 2020July 3, 2020 by Vrasidas Neofytou

The global financial markets fell sharply on Wednesday after the record low US March consumer spending, manufacturing data and disappointing financial Q1 earnings. US Retail Sales dropped 8.7% during March, the biggest one-month decline since 1992, while New York manufacturing activity hit an all-time low, declining by 78%.

The negative economic numbers reflect the complete shutdown of the US market as consumer spending accounts for more than two-thirds of economic activity. Mandatory social distancing and business closures, depressed demand for a range of goods, setting up consumer spending for its worst decline in decades combined with one of the worst manufacturing activity data since the Great Depression.

The gloomy US economic data showed a deep hit of the pandemic shutdown during March, strengthening economists’ belief that the US economy had already dropped into a recession.

Coronavirus Update:

Global cases: More than 2 million
Global deaths: At least 134,178
Most cases reported: United States (636,350), Spain (177,644), Italy (165,155), Germany (134,753), and France (134,582).

Market Reaction:

Dow Jones fell 2% on record low US economic data

The US stock markets plunged on Wednesday on a general risk aversion sentiment after the terrible US economic data and lower financial Q1 earnings.

*Fig.1, Dow Jones index, 30-minutes chart*

Both Dow Jones and S&P 500 indices fell nearly 2% having their worst declines since the start of April. However, the Nasdaq index closed with lower losses of 1.4%, supported from the ongoing tech stock rally, mainly from Amazon, Tesla and Netflix.

The banking sector suffered more than 5% in losses after some of the major US banks such as Bank of America, Goldman Sachs and Citigroup have all reported more than 40% declines in Q1 earnings. Financial corporations suffered huge losses on loans, credit cards and mortgages amid the pandemic outbreak.

Asian Pacific markets fell 1% on risk aversion sentiment following the overnight losses from the US session. The Nikkei index led then losses with 2% while the Kospi and Chinese indices fell 1%.

Crude Oil: Brent fell 7%, WTI hit $19 record low

The WTI crude oil prices hit fresh 18-year lows at $19 per barrel yesterday on the huge build ups in U.S. crude inventories. The US Energy Information Administration (EIA) reported yesterday a record jump of 19.3 million barrels in crude inventories for the week, ending April 10, much higher than the expected rise of 12 million barrels. Nearly 50 million barrels have added to the inventories over the past three weeks on lower oil demand amid pandemic lockdowns, sending the price of WTI to lows last seen in decades.

*Fig.2, WTI crude oil price, 30-minutes chart*

However, it was the Brent price that dropped the most by 7% after Saudi Arabia, Iraq, UAE and Kuwait offered their crude oil prices for May with deep discounts to Asian and European oil refinery customers. Those price discounts were the best indicator that the “oil price’’ war still holds, and every producer is looking to increase its market share.

Precious Metal’s rally lost some steam:

Gold price dropped by 1% yesterday on the stronger US dollar and sell-off in stock markets. The yellow metal still holds most of its recent gains, pricing above the $1.710 per ounce level on pandemic fears.

Silver price also closed with 2.5% losses at $15.42/oz, Platinum rose 0.6% to $779/oz while Palladium dipped 1.5% to $2,184/oz.

Forex Market: US dollar higher across the board

The US dollar was the stronger currency across the board on safe-haven demand. The greenback bounced from its monthly lows against risky currencies after it got strong safety flows after the gloomy US economic data and the sell-off in the stock markets.

*Fig. 3, USD/JPY pair, 30-minutes chart*

The DXY- dollar index rose to the 100 level while the USD/JPY pair bounced from its weekly lows of 107 towards the 108 level.

The bigger losers yesterday were the risky currencies such as the Sterling and Australian dollars which pulled back from their recent strong rally.
The energy-related currencies such as the Mexican Peso, Norwegian Crone and Russian Rouble were hit hard from the big losses in the crude oil prices.

Economic Calendar for April 16, 2020 (GMT+ 3:00):

Morning Briefing: Financial markets extended gains on pandemic optimism

Posted on April 15, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets rallied on Tuesday as investors have been becoming more optimistic that the pandemic is easing. The US markets extended their massive gains from their March lows on improved risk sentiment and a strong rally in the technology sector.

IMF sees pandemic recession worse than financial crisis:

The US futures and most of the Asian-Pacific markets turned negative this morning after the International Monetary Fund warned that the global economy is set to see its worst financial crisis since the Great Depression, according to its April World Economic Outlook.

The IMF expects that the global economy to contract 3% in 2020, almost 6.3% lower than its January 2020 outlook, making the “Great Lockdown” the worst recession since the Great Depression and far worse than the Global Financial Crisis in 2008.

However, IMF sees global growth rebounding 5.8% in 2021, saying that the recovery in 2021 would be only partial as the level of economic activity is projected to remain below the level, they had projected for 2021, before the virus hit. For the first time since the Depression, both advanced and emerging markets are in recession.

Finally, they project that the economic growth for selected countries/regions would be: U.S., -5.9%; Euro-area, -7.5%, with Italy falling -9.1% and Spain down -8.0%; Japan, -5.2%; Canada, -6.2%; China, +1.2%; India, +1.9%; Saudi Arabia, -2.3%.

Coronavirus Update:

Global cases: More than 1.97 million
Global deaths: At least 125,678
Most cases reported: United States (602,989), Spain (172,541), Italy (162,488), France (131,361), Germany (131,359).

Market Reaction:

US markets rally 3% on pandemic optimism

The US stock indices surged by 3% on Tuesday on signs that the pandemic is easing and on talks for a possible restart of the US economy at end of April. The Nasdaq index led the gains by 4% for its fourth straight positive day with shares of Amazon and Netflix rising to all-time highs on strong demand. The Dow Jones index rose by 2.4% at 23.950 while S&P 500 climbed 3.1% to 2.846.

*Fig. 1: Nasdaq Composite index, Daily chart*

Asian Pacific stock markets were flat during the Wednesday morning session, failing to follow the US overnight gains. Nikkei index fell 0.6% while the Australian and Chinese indices lost 1%.

US futures lost 1% following the negative report from IMF for the global economy, with Dow Jones indicating an opening near 23.800 points.

Crude oil plunged 10%, WTI dropped at $20

The Crude oil prices plunged by another 10% on Tuesday as the OPEC+ cut deal had failed to balance the energy market.

*Fig 2: WTI crude oil price, 2-hour chart*

The WTI crude oil contract fell 10% to settled at $20.11 per barrel yesterday, while the Brent oil plunged 7% to finish the day at $30.
Energy investors would be highly focused on the well-expected Energy Information Administration (EIA) crude oil Inventory data later today, to justify the huge inventory build ups in US. On weekly stockpiles data, the EIA is expected to report that U.S. crude stockpiles rose by 11.6 million barrels last week, after having risen 30.6 million barrels over the past three weeks.

However, in China, where the virus outbreak started and is now largely under control, oil demand appears to be returning, with data showing crude oil imports rising 12% in March from a year earlier.

Gold rallied to 8-year highs on recession fears

Gold prices extended their rally yesterday, reaching their highest level in 8 years at $1.750/oz on pandemic recession fears, weaker US dollar and the excess liquidity from global central banks. Silver prices also advanced to monthly highs near $15.80/oz while the Palladium price rose to $2.300/oz.

Forex Market: US dollar weaker across the board

The US dollar fell against major currencies on improved risk sentiment after better Chinese economic data. The latest aggressive monetary measures from the Federal Reserve have also added pressure on the dollar’s weakness.

The DXY-dollar index fell below the 99 level for the first time in April, while the USD/JPY struggles to hold the 107 level. The EUR/USD climbed near 1.10 and GBP/USD rose at monthly highs of 1.26.

Economic Calendar for April 15, 2020 (GMT+ 3:00):

Morning Briefing: Global markets higher on recovering Chinese trade data

Posted on April 14, 2020July 3, 2020 by Vrasidas Neofytou

The US futures and Asian Pacific stock markets moved higher by 2% on Tuesday morning after China announced better than expected trade balance data. China’s exports fell 6.6% in March after collapsing by 17% during the first two months of the year due the pandemic outbreak and lockdown in major cities.

Coronavirus Update:

Global cases: More than 1.9 million
Global deaths: At least 119,588
Most cases reported: United States (581,679), Spain (170,099), Italy (159,516), France (137,877), Germany (130,072).

Market Reaction:

Dow Jones fell 1% while Nasdaq higher on tech stock rally

The US stocks markets fell by 1 % on Monday ahead of the start of the corporate earnings season in the US. The Dow Jones index closed at 23.390, down 1.4% while the S&P 500 at 2.761 or -1%.

However, the Nasdaq index closed higher for its 3rd straight positive day fuelled by strong gains in technology companies such as Netflix, Amazon and Tesla.

The Dow Jones futures were moving higher by 1.5% on Tuesday morning following the positive economic data from China and the risk-on sentiment.

Asian markets up 2% on better Chinese trade data

The Asian Pacific stock markets surged this morning after better than expected Chinese trade balance data. The Nikkei index led the gains with 3%, while Kospi and the Shanghai indices followed with 1% in gains.

Crude oil fell 2% on insufficient OPEC+ cut deal

Crude oil prices fell 2% on Monday on oversupply concerns. The biggest ever oil output cuts from OPEC and its allies failed to lift oil prices higher as the deal will not end the greater collapse in global demand caused by the pandemic.

*Fig 1: WTI crude oil price, Daily chart*

WTI and Brent oil prices finished the day lower at $22,40 and $31,80 per barrel respectively, erasing the early Sunday night opening gains of 5% amid the OPEC+ cut deal.

Gold at $1.720/oz, its highest level since 2012

Gold price rose 1.5% on Monday, breaking above the key resistance level of $1.700/oz, to hit its highest level since 2012 as investors rushed to safety amid pandemic and supported from the weaker US dollar. Gold is up by more than $300/oz or 15% so far in 2020.

Furthermore, Gold also receives flows amid the lower interest rates as more global Central Banks cut their rates to fight the pandemic effects in their local economies.

Australian dollar extended gains to 1-month highs

The Australian dollar extended its recent rally against the US dollar and the Japanese Yen boosted by the improved risk sentiment after better than expected Chinese trade data this morning and the US dollar weakness.

The US dollar continued its weakness across the board as investors move to riskier currencies due to improved sentiment. The DXY-dollar index dropped near the 99 level, to its lowest level in April. The EUR/USD pair bounced at 1.095, the USD/JPY dropped near 107.7 while the GBP/USD hit fresh monthly highs at 1.256.

Economic Calendar for April 14, 2020 (GMT+ 3:00):