(23 April 2020)DAILY MARKET BRIEF 1:Oil gains as Trump tries fueling tensions in the Mid-East.
Most Asian stock indices traded in the green, as equities in Europe and the US reversed losses on Wednesday.
The
US crude inventories rose 15 million barrels last week, slightly lower than expected, but still a lot given that no one really knows where to
store the extra oil if pumping continues at the current speed. It is now said that tens of tankers carrying about 20 million barrels, enough to
satisfy 20% of global daily demand, are waiting near the US west coast with no place to go. The doggedness of oil producer nations is very
curious at this stage. Iran asked US and Canada to lower production, while OPEC nations are expected to come up with another agreement faced
with the latest slump.
But anything less than a total halt in production wouldn’t solve the problem of too much oil versus a severely
depressed demand.
One other option is to fuel geopolitical tensions in the Middle East to threaten supply and support prices. This is
what Donald Trump is doing right now.
WTI crude traded as low as $10 per barrel, then rebounded to $15 on Trump’s tweet ordering the US
Navy ‘to shoot down and destroy any and all Iranian gunboats if they harass [US] ships at sea’. But with little concern that the world will ru By
Ipek Ozkardeskaya n out of oil anytime soon, sowing chaos in the region may not boost prices sustainably. Downside risks
prevail, with the chatter that oil prices could plunge to -$100 a barrel.
By Ipek Ozkardeskaya
