(17 September 2020)DAILY MARKET BRIEF 2:Oil was also dragged down

In the commodity market, oil prices have retreated from their weekly peaks, as investors are concerned about the oversupply amid weak demand during the pandemic, even as Hurricane Sally disrupted production in the US Gulf Coast. Production platforms are planning to restart operations after the storm. Both WTI and Brent have lost over 1.1%, with the former trading at $39.62 while Brent hovers around $41.75. Crude prices rallied in the two previous sessions.

Oil was also dragged down by a bigger-than-expected increase in US distillate stockpiles, which include heating oil and diesel. The US Energy Information Administration said yesterday that distillate stockpiles rose 3.5 million barrels in the previous week. Still, weekly demand for fuel dropped to 2.81 million barrels per day, down over 27% compared to the same period in 2019.

Members of OPEC+ will meet later today but no further production cuts are expected.

In the long-term, the fuel might be overshadowed by alternative energy resources, as the world is gradually turning towards electric vehicles. Also, hydrogen might be the new catalyst for the energy sector. On Wednesday, Bloomberg reported that Indian Oil Corp, India’s biggest refiner that sells 50% of the oil products in the country, would roll out 50 buses powered by a mix of hydrogen and a compressed natural gas.

Giovanni Serio of Vitol Group, the world’s largest independent energy trader, said that hydrogen might be the most disruptive energy resource, having the potential to grow 10 times until 2050.

BloombergNEF estimated that the new market would need about $11 trillion of investment in production, storage and transport infrastructure to meet 25% of the total energy demand by 2050.

Elsewhere, Gold is declining from its two-week highs as the US dollar is gaining traction given the Fed’s accommodative policy.

The US currency initially declined after the Fed’s statements and disappointing retail sales data. However, it quickly returned to growth after Powell’s comments on the economic outlook, even though he admitted that the path head remained uncertain. The USD Index rose 0.33%, while EUR/USD declined 0.41% to drop below 1.1770.

The pound is extending gains against the euro ahead of the Bank of England meeting due for later today. However, the sterling is down against the US dollar.