Morning Briefing: Crude oil prices dropped 10% on disappointed OPEC+ cut agreement

Posted on April 10, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices plunged by 10% on Thursday as energy investors were not impressed from the 10 million barrels per day production cut proposed deal between OPEC and Russia. In addition, the deal could be in trouble after Mexico refused to participate in the cutbacks and left the OPEC+ meeting without approving the deal.

The US stock markets rose by 1% yesterday, after the Federal Reserve announced a massive $2.3 trillion program to support the US economy from the pandemic fallout.

Volumes and volatility are expected to be thin today as major global financial markets have closed for the Good Friday Easter holiday.

Coronavirus Update:

Global cases: At least 1,595,350.
Global deaths: At least 95,455.
Most cases reported: United States (461,437), Spain (153,222), Italy (143,626), France (118,781), Germany (118,181).

Market Reaction:

Crude Oil: Major price reversal

The OPEC group and other countries including Russia reached an agreement on Thursday to temporarily cut 10 million barrels a day, or about 10 percent from normal production levels, in May and June. According to an OPEC statement, the cuts would be tapering to 8 mbpd for the rest of 2020, then would decrease to 6 mbpd from January 2021, which would continue through April 2022.

The WTI contract price settled at $22.76, posting -9.3% losses while the Brent slipped -4% at $31.50, finishing an extremely volatile session for the energy market yesterday. Both oil contract prices spiked by 12% at midday’s session reaching intraday highs of $28.36 and $36.40 per barrel respectively after early rumours that OPEC+ members were discussing a 20 mbpd cuts.

However, the oil prices erased all gains and closed with huge losses of -10% as investors were disappointed from the final proposed 10 mbpd agreement and the rejection of the deal from Mexico. Energy investors feared that the 10 mbpd cut would be too small and too late and it would still not be enough to combat the unprecedented demand loss of 25 mbpd from the pandemic.

*Fig 1: WTI crude oil, 15-minutes chart*

Talks between the OPEC members and Mexico will continue Friday to reach a final agreement as Mexico was willing to cut only 100k bpd instead of the proposed 400k bpd from OPEC.

In addition, OPEC called on other major crude producers, such as the U.S, Canada, Norway, Brazil and others to cut their production by an additional 5 million barrels per day. Energy ministers from the Group of 20 major economies will organize for their own virtual meeting later today to discuss the proposed cuts.

Equities: Best week since 1974

The major US stock markets extended their impressive weekly gains by surging another 1.5% on Thursday. The Dow Jones index closed at 23.720 or 1.5% higher, the S&P 500 advanced 1.2% while Nasdaq closed 0.8% higher.

The S&P 500 surged 12% this week, which was its biggest weekly gain since 1974. After Thursday’s rally, the S&P 500 is up more than 25% from its March closing low.

Federal Reserve and US Jobless Claims

The Federal Reserve announced a further $2.3 trillion aid for Covid-19 on Thursday, including a pledge to provide support to risky corners of financial markets that have been hit the hardest by the fallout from the pandemic.

The Fed support came as U.S. jobless claims surged for a third-straight week, rising by 6.6 million to total about 17 million jobs lost in just three weeks.

Precious Metals: 3% rally

Gold and Silver prices surged over 3% on weaker the US dollar as a result of the Fed’s measures. The bullions found support also from the rise in US jobless claims and the ongoing pandemic uncertainty.

Forex Market: US dollar weaker across the board

The US dollar fell to weekly lows against major currencies after the Federal Reserve increased the supply of dollars in the market amid its massive new lending program. In addition, the rally in the US stock markets removed some safe havens flows for the greenback while the higher US jobless claims had also pressured the dollar index below the 100 level.

The weakness in the greenback together with the improved market risk sentiment, helped the risky currencies such as the Australian and New Zealand dollars to advance across the board. The AUD/USD was trading at 0.634 this morning, gaining more than 800 pips since it bottomed near 0.55 on March 19th on pandemic fears.

In addition, the Pound Sterling had also advanced yesterday against the US dollar, reaching fresh one-month highs near 1.25 level.

The Sterling was supported on reports, that the British Prime Minister Boris Johnson left intensive care following his hospitalisation for COVID-19 symptoms.

Economic Calendar for April 10, 2020 (GMT+ 3:00):

Morning Briefing: Global markets and Crude oil extended gains ahead of the OPEC+ meeting

Posted on April 9, 2020May 27, 2020 by Vrasidas Neofytou

The global financial markets and crude oil prices extended on Wednesday their weekly gains on improved risk sentiment, amid signs of pandemic slowdown and ahead of the OPEC+ meeting. The US stock indices climbed after Senator Bernie Sanders dropped out of the 2020 US presidential race.

Coronavirus Update:

Global cases: More than 1,511,104
Global deaths: At least 88,338
Most cases reported: United States (429,052), Spain (148,220), Italy (139,422), France (113,959), and Germany (113,296).

Market Reaction:

Crude Oil:

Energy investors will be focused today on the well-expected OPEC and other global oil producing countries teleconference to discuss and decide on potential sizable joint output cuts to save the energy sector from the pandemic fallout. Major crude oil producing countries such as Saudi Arabia, Russia, US, Canada, Brazil and other OPEC group members were considering having a joint output cut between 10-15 million barrels per day, according to delegates.

WTI and Brent crude oil prices surged by 4% on Wednesday, finishing the day near $26 and $33.50 per barrel. The prices jumped during the last half hour of the session after comments from Algeria’s energy minister saying that he expected a “fruitful” meeting.

Global Equity Markets:

The US stock markets gained more than 3% last night after Senator Bernie Sanders dropped out of the 2020 presidential race in the USA, removing a political risk from Wall Street. Some of Sanders’ policy proposals, including Medicare for All, raised concern among several business owners and investors who feared taxes would go up under his presidency.

The Dow Jones index and S&P 500 indices gained 3.4%, to close at 23,433 and 2,750 respectively, while the Nasdaq Composite rose 2.6% to 8,090. It was the first time the Dow Jones index closed above the 23,000 level since March 13th, while it gained nearly 30% since it bottomed on March 23 amid pandemic fears.

However, the Dow futures were slightly lower this morning ahead of the release of the U.S. unemployment claims report and unemployment rate later today. Economists are expecting an increase of 5 million, which would build on the record-shattering prior two readings of 6.6 million and 3.3 million.
Asian-Pacific stock markets moved higher by 1% this morning following the overnight gains from Wall Street combined with the removal of travel restrictions in China’s Wuhan city after the 11-week quarantine.

Forex Market:

The Euro currency was the weaker across the board yesterday after the Eurogroup finance ministers failed to agree a joint measure on response to the pandemic.

The EUR/USD pair was trading near 1.0844 level this morning ahead of resumed Eurogroup talks with hopes to eventually agree a bailout deal.

The US dollar was stable yesterday, with DXY-dollar index holding above the key support level of 100, the USD/JPY traded near 109 level while the GBP/USD remained below 1.24.

Commodity currencies such as the Australian and New Zealand dollars were the strongest yesterday, getting support from the improved risk sentiment and the rising prices of crude oil and copper.

Economic Calendar for April 09, 2020 (GMT+ 3:00):

Morning Briefing: US markets posted their worst intraday reversal since 2008

Posted on April 8, 2020July 3, 2020 by Vrasidas Neofytou

The global financial markets continued their roller-coaster trading over the headlines of the developments around the global coronavirus pandemic. The US stock markets closed slightly lower on Tuesday, posting their worst intraday reversal since 2008, giving up their massive intraday rally of 4% after the New York state and United Kingdom reported their highest one-day death toll so far.

The New York governor Andrew Cuomo reported more than 800 fatalities on Tuesday, its highest daily death toll so far. The United Kingdom has recorded 708 new deaths from the coronavirus, the largest one-day rise since the outbreak began, with a total death toll of 4.313 people.

The US President Donald Trump blasted the World Health Organization for getting “every aspect” of the pandemic wrong and threatened to withhold funding to the organization during his press conference on Tuesday.

The Japanese Prime Minister Shinzo Abe formally declared a state of emergency overnight including the capital city of Tokyo, while the city of Wuhan in China lifted its 3-months lockdown. The city expects a mass exodus as airports, train stations and roads reopened.

Coronavirus update:

Global cases: More than 1,426,000
Global deaths: At least 81,865
Most cases reported: United States (396,223), Spain (141,942), Italy (135,586), France (110,065) and Germany (107,663).

Market Reaction:

The major US stock markets settled with slight losses of 0.3% on Tuesday, giving up a 4% intraday rally earlier in the day. The Dow Jones index gave up a 1.000 points surge, closing at 22.653, posting its worst intraday reversal since 2008.

*Fig 1: Dow Jones index, 30 minutes chart*

However, the Dow futures managed to rebound by 1% during Wednesday’s Asian session, indicating an opening near 22.850.

Asian Pacific stock markets were higher this morning following the gains of the US futures. The Kospi and ASX 200 indices surged by 1.5% while the Nikkei index gained 2.5% after the Japanese Prime Minister Shinzo Abe formally declared a state of emergency. The Chinese indices fell by 1% despite the city of Wuhan lifting its lockdown measures.

Crude oil:

WTI and Brent crude oil prices plunged by 9% on Tuesday, finishing the day at $23.63 and $31.87 per barrel respectively. Investors believe that the expected coordinated production cut from OPEC and other global oil producers would not be enough to wipe out the current supply glut and the massive falling demand of 25 million barrels per day amid pandemic-related lockdowns.

Both contracts reversed early Tuesday’s gains after the U.S. Energy Information Administration agency reduced its U.S. and global price forecasts and outlook for domestic production for this year and next. More specific, the EIA cut its 2020 U.S. oil production forecast by 1.2M bbl/day, expecting an 11.8 million b/d in 2020 production, down from the current weekly production of 13 million bpd.

*Fig 2: WTI crude oil price, 30 minutes chart*

However, crude oil prices jumped by 3% on Wednesday morning on reports that OPEC and its allies have been considering an output cut by 10 million barrels per day for the rest of the year. The WTI price gained $2 this morning currently trading at $25 per barrel while Brent contract is pricing near $32.50 level.

Forex Market:

The US dollar has been the strongest currency across the board this morning following the risk aversion sentiment. The DXY-dollar index managed to rebound above the 100 key resistance level on the backdrop of the renewed pandemic worries and overnight stock market sell-off.

*Fig 3: DXY-dollar index, 30- minutes chart*

The USD/JPY extended its weekly gains by rising near the 109 level on the weaker Japanese Yen, while the EUR/USD dropped near the 1.083 level.
The Pound Sterling failed to extend its gains yesterday, after the report for a record one-day death toll in the United Kingdom combined with the rising concerns over the illness of the Prime Minister Boris Johnson.

Economic Calendar for April 08, 2020 (GMT+ 3:00):

Morning Briefing: Dow Jones rallied 7% on early signs of pandemic easing

Posted on April 7, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets extended their recent gains after signs that the pandemic in major epicentres such as New York, Italy and Spain have already stated slowing. The death tolls have shown signs of easing worldwide, while China had reported no new death for the first time since the outbreak of coronavirus.

The improved market sentiment was also boosted from comments by US President Donald Trump saying that “there’s tremendous light at the end of the tunnel,” during a White House press briefing.

Investors felt relieved after the statement from the World Health Organization Director-General Dr. Tedros Adhanom Ghebreyesus saying that the research to develop vaccines and treatments to fight the coronavirus have “accelerated at incredible speed.”

Coronavirus Update:

Global cases: At least 1,341,907.
Global deaths: At least 74,476.
Most cases reported: United States (366,614), Spain (136,675), Italy (132,547), Germany (102,453), and France (98,959).

Market Reaction:

The US stock indices rallied by 7% on Monday on rising hopes that the pandemic outbreak may have slowed. The Dow Jones index gained 1.600 points, posting its third biggest point gain ever.

The major US stock indices finished the day with a stunning 7% in gains on Monday to a potential stabilization of the pandemic in the U.S. The Dow Jones index gained 1,600 points, posting its third biggest point gain ever. The S&P 500 jumped 7% to its highest level since March 13th . With Monday’s rally, the US indices managed to bounce about 20% from their yearly low on March 23.

The Asian-Pacific stock markets rose by 1% on improved risk sentiment as China reported no new death from the pandemic and falling new infection cases in the region.

VIX fear index:

The Cboe Volatility Index -VIX which is one of the most widely watched indicators of market sentiment in the world, has dropped to its lowest level since the escalation of the pandemic. The index is pricing near the 45 level, falling off the recent peak of 83, indicating lower uncertainty amongst investors and improved market sentiment.

Crude Oil:

Crude oil prices plunged by 8% on Monday following the delay of the OPEC+ meeting to April 9th. WTI and Brent oil prices fell as much as 12% during the day before settling a little higher at $26 and $33 per barrel respectively.

However, oil prices bounced back by 2% this morning on hopes that the producing countries would agree to some form of output cut. There is a growing optimism that the world’s largest oil producers including Saudi Arabia, Russia and the rest of the OPEC members, will eventually agree to cut output by more than 10 million barrels per day on their meeting on Thursday.

The only unknown on these behind-the scene- discussions until now is the size of the cut for each party and if countries such as US, Canada, Norway, Brazil, Mexico will participate in the cuts and by how much?

Precious Metals:

Gold and Silver prices rallied by 3% yesterday, reaching monthly highs amid stronger physical demand on the backdrop of zero interest rates and a weaker US dollar. Furthermore, the bullion got support from the massive global Fiscal and Monetary stimulus measures which have increased the liquidity in the market and effectively dilutes the local currencies.

Gold price jumped to as much as $1.680/oz before retreating to the $1.660/oz levels while Silver price rallied up to $15.50/oz before stabilizing near $15.20/oz.

Forex Market:

The Pound Sterling extended two-days losses against major currencies after U.K. Prime Minister Boris Johnson was moved to intensive care as his coronavirus symptoms worsened. Johnson was admitted to hospital on Sunday night and had been undergoing tests after suffering persistent coronavirus symptoms, including a high temperature, for more than 10 days.

The improved risk appetite sentiment had boosted risky currencies such as Australian and New Zealand dollars to gain ground against the US dollar and the Yen. Furthermore, the Aussie got support after RBA left interest rates unchanged this morning

Economic Calendar for April 07, 2020 (GMT+ 3:00):

Morning Briefing: Global markets jumped by +4% as virus death rate slows

Posted on April 6, 2020July 3, 2020 by Vrasidas Neofytou

The global stock markets rose by more than 2% during the first trading session of the week on improved sentiment over rising pandemic optimism. The global investors cheered the latest data during the weekend showing that the daily growth rate of infection cases and deaths have fallen in major global epicentres such as New York, Italy, France and Spain.

However, the crude oil prices fell by 6% after OPEC+ postponed its Monday’s virtual meeting for production cuts on April 9th amid escalation of the “blame game” between Russia and Saudi Arabia.

Coronavirus Update:

Global cases: More than 1.27 million
Global deaths: At least 69,300
Most cases reported: United States (337,072), Spain (131,646), Italy (128,948), Germany (100,123), and France (93,773).

Market Reaction:

The major U.S. stock futures prices jumped by more than 3.5% during the Monday morning Asian session on a general risk-on sentiment amid lower pandemic cases. The Dow futures traded +4% higher, implying an opening near 21.900 points. The morning gains have paired the total losses of 2.5% from last week over concerns for further economic slowdown due to the pandemic.

The Asian Pacific stock markets followed the gains from US futures. The Australian index led the gains by 4%, while the Nikkei and Kospi rose by 2%. The Chinese markets are closed today for a holiday.

Crude oil:

WTI and Brent oil prices opened Sunday’s night trading session with 10% losses at $26.30 and $31.70 per barrel, erasing some of the huge gains from last week. However, the prices managed to bounce back at $28 and $34 per barrel levels ahead of the European opening hours on improved sentiment.

The drop in oil prices was triggered after the OPEC group postponed its virtual meeting initially scheduled for this Monday over a potential agreement to cut production. The meeting will take place on Thursday after the diplomatic “blame game” between Russia and Saudi Arabia during the weekend for the falling oil prices and the failed production cut agreement back in March.

Monday’s OPEC+ meeting was initiated by Saudi Arabia after pressure from US President Donald Trump to stop the falling oil prices and bring a stabilization in the energy sector. As a result, investors lifted the oil prices by 40% during last week’s sessions on higher optimism for a general production cut from major producing OPEC group members such as, Russia, USA, Canada, Norway and Brazil.

Forex Market:

The Japanese Yen was the weaker currency across the board this morning as the Japanese Prime Minister Shinzo Abe is expected to declare a state of emergency as early as Tuesday to curb the rising infection cases in the country.

The USD/JPY pair was pricing near key resistance level of 109 or +0.50% at the early European session on stronger US dollar and the stock market rally in Asia. The dollar had gained 300 pips since it bottomed against the Yen last week and 700 pips since March’s lows.

The Australian and New Zealand dollars rose by more than 0.70% against the Yen this morning as the number of growth rates of infection cases in Australia have dropped to their lowest during the weekend. Both pairs managed to hold their morning gains, despite the losses in the crude oil market ahead of the OPEC+ meeting.

The Pound sterling extended last week’s losses against the US dollar after British Prime Minister Boris Johnson was taken to hospital on Sunday following persistent coronavirus symptoms. Mr Johnson was the first major governmental leader known to have contracted the disease which was negative for the Sterling.

Economic Calendar for April 06, 2020 (GMT+ 3:00):

Morning Briefing: Crude oil prices skyrocketed by 25%, their largest 1-day gain on record

Posted on April 3, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices skyrocketed by 25% on Thursday, for their largest one-day percentage gain on record. The rally was triggered after a tweet from U.S. President Donald Trump saying that he spoke to Russian and Saudi Arabian leaders and expects them to announce an oil production cut of 10 million barrels per day. However, the oil rally had faded, and prices retraced by 5% this morning after both countries denied any talks or cut agreement.

Coronavirus Update:

Global cases: More than 1,011,000.
Global deaths: At least 52,800.
Top 5 countries: United States (242,182), Italy (115,242), Spain (112,065), Germany (84,788), and China (82,432).

Market Reaction:

Crude Oil:

Crude oil prices surged by 25% after Trump’s intervention in the energy market combined with the reports that China will start buying crude oil for its emergency reserves.

The WTI oil contract finished the historic day at $25.32 per barrel, posting its largest single-day percentage gain in record, while Brent price closed at 29.14.

The oil price rally triggered after Trump told CNBC’s Joe Kernen on Thursday that he spoke to the Russian President Putin and Saudi Crown Prince Bin Salman on Thursday and expects them to announce an oil production cut of 10 million barrels and could be up to 15 million. However, Trump didn’t make any reference to the time frame of the cuts and how would be distributed across the oil-producing countries.

Furthermore, Saudi Arabia called for an “urgent” meeting between OPEC and its allies led by Russia with aim of reaching a fair agreement to restore the desired balance of oil markets.

The saddened oil price spike rally faded during the overnight trading, with both oil contract falling by 5%, as energy traders questioned whether a cut of the magnitude Trump is suggesting was even plausible, especially if the U.S. doesn’t participate. The administration would not, in fact, ask domestic producers to cut production, according to a Reuters report.

OPEC countries led by Saudi Arabia proposed last month a production cut of 1.5 million barrels per day as demand waned. However, OPEC ally Russia rejected the cut, sparking a price war between the two powerhouse producers. The production cuts that were previously in place expired on March 31^st. On Wednesday, Saudi Arabia ramped up its production to more than 12 billion barrels per day.

Equities:

The US stock markets surged by 2% on Thursday supported from the massive rally in the energy and financial sectors. The Dow Jones index closed higher by 2.2%, at 21,413 while the S&P 500 and Nasdaq finished also the day up by 2.3% and 1.7%. Major energy stocks such as Chevron, Exxon Mobil and Conoco Phillips rallied by more than 10%, while leading financial company’s shares rose to 4% on relief for their huge exposure in energy loans.

Meanwhile, the Dow index dropped to intraday lows of 20.600 earlier in the session, just after the announcement from the US Labour Department reporting more than 6.6 million people filed for unemployment benefits in the week of March 27, as coronavirus-related shutdowns roll through the country.

However, the US futures and Asian markets were trading lower by 1% this morning as investors worried for the huge increase by 6.6 million in the US jobless claims last week due to coronavirus lockdowns. The Dow futures indicating an opening near 21.100 level, or down by 1.30%.

NFP report:

The Non-Farm Payrolls report for March is expected to be released later today. The economists expect a large decline of 100k in nonfarm payrolls, down from February when the US added 273,000 jobs. If the numbers do come in negative, it will be the first time that jobs have contracted since 2010, ending nearly a decade of labour market expansion.

That would boost the unemployment rate to 3.8% from 3.5% a month earlier due to the impact of pandemic in the US labour market. Still, the March report won’t be a complete picture of the full impact that the coronavirus pandemic has had on the US job market, as the report will include payroll data only through the week ending March 14.

Safe Havens:

Precious metals and US Treasuries extended their gains during Thursday’s session receiving safety flows on higher US jobless claims and pandemic concerns.

Gold price gained almost 2%, climbing near $1.615/oz while Silver gained 4% to $14.50/oz. The US 10-year Treasury yields fell near 0.585 while the yield on the 30-year Treasury bond was down at 1.24%

Forex Market:

The US dollar was the strongest currency across the board yesterday receiving support from pandemic concerns and from the higher oil prices since the US is the largest energy producer in the world. The DXY dollar index managed to break above 100 key resistance level, extending its weekly gains, while the USD/JPY bounced up to 108 resistance level.

The EUR/USD pair hit weekly low of 1.0850 on weaker EU economic data combined with the rising pandemic-related fatality figures in Italy and Spain.

However, the extraordinary surge in the crude oil prices has help the commodity related currencies to bounce off their weekly lows. The Australian and Canadian dollars gained more than 0.5% against Japanese Yen, while the Norwegian Crone extended its recent rally.

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