Morning Briefing: Crude oil surged 10% on re-opening optimism and higher demand

Posted on May 5, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices have surged 10% since the start of the week on expectations that fuel demand will recover as more countries in Europe and Asia as well as some US states announced they would begin easing lockdowns and social-distancing restrictions and restart their economic activities. The rally in energy shares helped US markets to erase early session losses on renewed US-China trade tensions.

Coronavirus Update:

Global cases: More than 3.5 million
Global deaths: More than 251,000
Most cases reported: United States (over 1.17 million), Spain (over 218,000), Italy (over 211,900), United Kingdom (over 191,800), France (over 169,500).

Crude oil

Crude oil contracts surged 2% on Tuesday, extending Monday’s 8% gains. WTI crude price climbed to $22 per barrel, while Brent price broke above the $28 level, hitting 3-weeks highs. Energy sentiment has improved as analysts believe that the crude oil market had bottomed and it been on the slow road to recovery.

In addition to the improved demand site, global supply has been coming down as the OPEC+ production cut deal of 9.7 million bpd started on May 1st. The production shutdowns in global deep-sea projects combined with cuts in shale oil and oil sands petroleum industries in US and Canada had removed more than 2 million bpd at the beginning of May amid the lower oil prices.

Market Reaction:

US stock markets settled slightly higher on Monday, erasing earlier losses on concerns about renewed US-China trade tensions combined with losses on airlines shares.

The indices managed to rebound at the end of the session, supported from the rally on energy and technology shares amid the growing optimism around the gradual re-opening of global economies.

Dow Jones index dropped as low as 23.250 at early in the session, losing more than 7% since it peaked at 25.000 last Thursday, before it bounced near 24.000.

Asian Pacific markets rose on Tuesday following the overnight gains from Wall Street. Hang Seng and Australian indices led the gains with 1% while markets in China, Japan and South Korea are closed for holidays.

Gold price rose above $1.700 per ounce on Monday on geopolitical worries. Investors flew to the safety of the yellow metal after the resumption of the trade tension between US and China.

Forex Market:

The US dollar was stronger across the board, rising for a second day on risk aversion sentiment. The greenback has received safety flows on the rising geopolitical risks and weak global economic data. The DXY-dollar index climbed up to 99.50 against a basket of currencies after it dropped near 98.50, last Friday on stimulus plans from the Federal Reserve.

The US dollar hit fresh monthly highs of 7.15 against the Chinese Yuan (CNH) on rising fears on US-China trade tensions. The pair jumped from last Thursday’ lows of 7.05 after President Trump warned for new tariffs on China. The pair approached the multi-year highs of 7.20 reached during the peak of the trade war last September, as investors raised concern for resumption of trade tensions and tariffs.

Economic Calendar for May 05, 2020 (GMT+ 3:00):

Morning Briefing: Global markets fell 1% as Trump threatened China with new tariffs

Posted on May 4, 2020May 27, 2020 by Vrasidas Neofytou

Global markets and crude oil prices fell by more than 1% on Monday morning as risk sentiment deteriorated after U.S. President Donald Trump threatened to impose new tariffs on China over the coronavirus outbreak.

Any escalation of geopolitical tensions could damage the efforts of the global economies to recover from the virus-related lockdowns. The ongoing tension between the world’s largest economies could continue impacting market sentiment and worsen the global trade.

Coronavirus Update:

Global cases: More than 3.5 million
Global deaths: More than 247,300
Most cases reported: United States (over 1.15 million), Spain (over 217,400), Italy (over 210,700), United Kingdom (over 187,800), France (over 168,800).

Market Reaction:

The US equity futures opened lower by 1% for the week, extending last week’s losses. The rising tensions between US and China were the main catalysts for the massive losses last Friday, were Dow Jones and S&P 500 lost 2.6%, while the tech-sensitive Nasdaq index lost 3.2%.

Dow Jones index has lost 1.500 points or 6% since last Thursday, after President Trump said that he suspects the virus came from a lab in China without giving any evidence to support that claim.

Asian markets traded lower on Monday morning, following losses on Wall Street. The China-related Hang Seng and Indian Nifty indices led the losses by 4% while markets in China and Japan were closed for holidays.

Crude oil:

Crude oil prices fell 4% this morning as the resumption of the trade war could be a negative factor for the energy market over the long term. Both US and China have been the largest oil consumers in the world, and any increased trade tariffs could deteriorate further the already fragile global oil demand amid pandemic outbreaks. The WTI crude price fell back to the $18 level, while the Brent price dropped near $26 per barrel.

Both oil contracts gained more than 20% last week, as OPEC members and Russia begun the agreed cut production of 9.7 mbpd on May 1st, combined with the expected rebound in the demand for petroleum products amid the restart of the global economies. In addition, oil prices extended gains after both US and Canada reported joined lower oil production by 2 mbpd amid the shutdowns followed by the lower oil prices.

Forex Market:

US dollar was stronger across the board on safety flows this morning. The DXY-dollar index bounced back to the 99.50 level after it dropped as low as 98.60 since last Friday on dovish comments from the Federal Reserve.

The greenback climbed to one-month highs near the 7.14 level against the Chinese Yuan after President Trump warned for new tariffs on China. The pair is approaching the multi-year highs of 7.20 reached during the peak of the trade war last September, a sign that investors are still afraid for another round of trade tensions.

The Australian and New Zealand dollars have erased some of their massive gains during April on risk aversion sentiment. Both economies have strong trade ties with China and any possible restart of the trade war could be negative for their currencies.

The Aussie rally have lost some steam at the end of last week, after it hit 6-weeks highs at 0.66 on risk appetite amid the removal of the virus-related restrictions and the restart of the global economies.

Economic Calendar for May 04, 2020 (GMT+ 3:00):