(16 April 2020)DAILY MARKET BRIEF 2:WTI crude slipped below the $20 a barrel for the first time

(16 April 2020)DAILY MARKET BRIEF 2:WTI crude slipped below the $20 a barrel for the first time

16 April 2020, 09:05
Jiming Huang
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WTI crude slipped below the $20 a barrel for the first time in a move that has been more sustainable than we have seen previously, after the IEA said that the global oil demand will slump 9% this year, meanwhile the oil storage will be full by mid-2020. It again comes back to the simple equation of too much offer versus a tumbling demand. But oil producers don’t want to hear a word of it, at least this is what we conclude after the leading oil suppliers failed to come up with a strong commitment to reduce their joint production. But the market always adjusts itself. With oil prices this low, many oil producer nations will need to back off for a while, given that pumping oil below $20 a barrel is economically unviable for most of them. Therefore, looking for dip-buying opportunities is the main play in oil. For energy stocks however, the downside risks persist.


Else, gold didn’t shine as a result of equity sell-off, rewarding only those who piled into the precious metal in a preventive action before the equity sell-off hit the market place. The ounce traded below the $1750 mark, but support is building near the $1700 with fading appetite for risk.


In foreign exchange, the US dollar gained field, supported by increased capital flows to safety. The US 10-year yield slipped below 0.65%. Due today, the unemployment claims in the US is expected to print another unpleasant week, with the consensus of analyst expectations pointing at above 5 million extra claims. But we do not rule out the possibility of an uglier figure on the back of increasing job losses due to the prolonged halt in US economic activity. Bad data could however back inflows to the greenback, with investors tempted to return to cash ahead of a potentially renewed market turmoil in the coming weeks.


The EURUSD retreated to 1.0865, as Cable slipped below the 1.25 mark. Further downside correction is expected in both markets.


The USDCAD, on the other hand, cleared the 1.40-resistance in a swift move, as the Bank of Canada (BoC) maintained the interest rate unchanged at 0.25% as expected. Depressed oil prices should continue weighing on Loonie.

By Ipek Ozkardeskaya

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