Tensions between the United States and Iran are driving oil prices

Oil production

Brent is the most important oil for Europe. The WTI variety comes from the USA.


(Photo: dpa)

Singapore Oil prices continued their significant recovery from the previous day on Friday. The decisive factor on Thursday, however, was not an easing of weak demand and excess supply, rather political tensions between the USA and Iran led to rising risk premiums for crude oil.

After an incident on the open sea, US President Donald Trump instructed the Navy on Wednesday to destroy Iranian ships should they stand in the way of American ships. Iran reacted sharply on Thursday with counter threats. Relations between the United States and oil-rich Iran have long been under strain.

In Asian trade, a barrel (159 liters) of the North Sea type Brent last cost $ 22.48. That was $ 1.15 more than the previous day. The US variety WTI was traded at $ 17.70 per barrel. It was $ 1.20 more than on Thursday. By contrast, oil prices on Monday and Tuesday still collapsed. The stock markets were also heavily burdened by this, as concerns about the American energy sector are associated with the price collapse.

After the stock market recovered somewhat as oil prices rose, US Treasury Secretary Steven Mnuchin recently announced that he was considering a loan program for the country’s troubled oil industry. According to those familiar with the matter, the loans would be provided through the Fed. However, the instrument is only one of several options: “We haven’t decided yet,” said Mnuchin.

Despite the current recovery, the enormous supply overhang in the crude oil market remained unbroken. From the perspective of market observers, this will also continue, which is why oil processors recently had a race for freight capacities on ships to store excess petrol and kerosene. Pipeline operators also tried to create more storage space.

With no light visible at the end of the tunnel, the market is preparing for a sustained weakness in demand that will change the oil industry. As the World Bank announced, it expects the weakest recovery in history after the slump in the oil market.

Market observers are initially hoping for a phase of relative stability with the production cuts beginning on May 1, which were agreed by leading oil nations. The start of the cuts was “very constructive,” said Michael McCarthy, strategist at broker CMC Markets Asia Pacific. It appears that the average price for WTI will range between $ 15 and $ 20 a barrel in the near future

Here is the page with the Brent Prize, here for STI course.

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An economic stimulus package for the climate

Dusseldorf Numerous business associations, companies and environmental protection associations wrote to the Chancellor on Monday. Your demand: The billion dollar stimulus packages according to Corona should above all take climate change into account.

“The necessary investment aids can set the course that will determine social and economic development over decades,” says the letter, which the Federal Association of Energy and Water Management (BDEW), the Association of Municipal Enterprises (VKU) and others say hundred individual environmental organizations and companies like the energy company Engie have signed. “It is up to you to use the economic break from Covid-19 for a sustainable restart of our economy,” the signatories demand.

The world is currently fighting the consequences of the global corona pandemic with a lot of money. Only one industry often seems to be losing out: the energy industry. The EU Commission has already put numerous projects of the planned “Green Deal” on hold, while some politicians are already demanding that the planned CO2 tax be postponed in order to protect car and aviation companies after the crisis.

Numerous industries for which greater climate protection means disadvantages are protesting loudly against further climate policy requirements, whether nationally or at EU level. It is not just the affected energy industry that warns of such decisions.

The Agora think tank fears that the corona crisis could lead to “reluctance to make investments that are relevant to climate protection”. That is why the Berlin experts are proposing a € 100 billion program. Investments are to be made in wind power, electric cars, hydrogen and intelligent power grids.

Fatih Birol, head of the International Energy Agency (IEA), is now demanding that governments invest more in climate-friendly industries. A kind of “green reboot” as an opportunity after the crisis.

“Economic revival after the corona crisis and climate protection are not a contradiction in terms,” ​​says Manfred Schmitz, CEO of Engie Germany, the Handelsblatt. After all, the financial crisis had learned that it was important to “invest part of the funds more appropriately in promising areas”.

At that time, Germany promoted, for example, the scrapping premium for the scrapping of older vehicles to promote the auto industry. Anyone who sent their intact car to the scrap press received a grant of 2,500 euros from the state for the new purchase.

This measure was anything but beneficial for the climate. “It is precisely for this reason that we as an Engie group joined the Green Recovery Alliance,” explains Schmitz.

Lobbying battle for economic stimulus

The alliance of more than 180 CEOs, including from UnileverIkea Eon, Engie and Volvo, Politicians and organizations want to organize measures to revive the economy after the corona crisis based on the European Green Deal.

If the economy suddenly collapses, climate protection is no longer the most urgent problem. There is growing concern that nobody wants to spend any more money on the energy transition. A real lobbying battle ensues for the multi-billion dollar economic stimulus.

Handelsblatt Morning Briefing - Corona Spezial

While the car industry is hoping for a new scrapping premium, environmentalists fear that the turnaround in traffic will stall. The environmental association BUND therefore calls for public funds to be tied to ecological requirements.

“The smartest economic stimulus is the one that triggers investments in climate protection technologies. Because these are investments in the future, ”warns Kerstin Andreae, head of BDEW in an interview with the Handelsblatt. Suspending climate protection measures now is exactly the wrong way to go. “Crisis management and climate protection must not be played off against each other,” says Andreae.

The association presented a five-point catalog on Friday. Among other things, it calls for the cover for photovoltaic subsidies to be lifted, for the electricity price to be exempted from taxes and duties at short notice, and for distance rules for wind turbines to be waived on land. The energy transition should not be neglected because of the corona crisis, because “climate change does not stick to a lockdown,” emphasizes BDEW boss Andreae.

As good as the exit restrictions in many countries are doing the climate right now: Even during the financial crisis of 2008, there was a worldwide kink in the curve of greenhouse gas emissions. After that, however, it only rose again all the more steeply. After all, it was about jobs and the economy. Climate protection was of secondary importance.

More: Why Corona is good for the climate, but slows down the energy transition.

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Scarce stocks push the WTI price to 18-year lows

Oil production in the United States

High inventories are causing the WTI price to collapse.

(Photo: AFP)

Dusseldorf The US variety WTI is as cheap as it was 18 years ago. But while the WTI price dropped temporarily by more than 12 percent and stood at $ 17.42, the North Sea variety Brent was even able to grow slightly.

The reason for this inconsistent oil price movement is the high US inventory. Because despite the planned relaxation of virus restrictions, the corona crisis is depressing the economy in the United States. In March, the US industry cut production more than it has since 1946. And the US will not recover from this shock of demand so quickly: refineries demand less and less crude oil.

At the same time, stocks are becoming increasingly scarce: Saudi Arabia has already chartered dozens of super tankers as floating oil warehouses. Opec General Secretary Mohammed Barkindo expects all deposits to be filled in May.

The result: “Several producers who do not have any nearby storage facilities will have to stop production in the coming weeks,” says Michael Salden, head of raw materials at Schweizer Vontobel private bank.

The pressure on oil prices has been heightened in recent weeks by the oil war between Saudi Arabia and Russia. However, even the reduction in production by around ten million barrels (around 159 liters) of daily production agreed by the leading oil nations has recently failed to stabilize the oil price.

The fight against the corona virus has locked billions of people worldwide, and air traffic has largely come to a standstill. The International Energy Agency (IEA), for example, is therefore expecting a drop in oil demand of 20 million barrels a day in the second quarter – twice as much as the decision to cut the oil supply.

In a joint statement by the energy ministers of Saudi Arabia and Russia, it was said on Friday that the countries “continue to monitor the oil market closely and are ready to take further measures together with Opec and other producers if this is necessary”.

Saudi Aramco said on Friday that it would reduce deliveries to 8.5 million barrels a day from May 1.

“We see record cuts, but still not enough to bring the market even close to equilibrium,” said Warren Patterson, head of commodities strategy at ING Bank NV.

The expectation of further weak oil demand in the wake of the corona crisis also confirms new data on the gross domestic product in China, which has shrunk there for the first time since at least 1992. At that point, China had started to publish quarterly growth figures.

More: Saudi Arabia has gambled on oil poker.

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Scarce deposits push the WTI price to 18-year lows

Oil production in the United States

High inventories are causing the WTI price to collapse.

(Photo: AFP)

Dusseldorf The US variety WTI is as cheap as it was 18 years ago. But while the WTI price dropped temporarily by more than 12 percent and stood at $ 17.42, the North Sea variety Brent was even able to grow slightly.

The reason for this inconsistent oil price movement is the high US inventory. Because despite the planned relaxation of virus restrictions, the corona crisis is depressing the economy in the United States. In March, the US industry cut production more than it has since 1946. And the US will not recover from this shock of demand so quickly: refineries demand less and less crude oil.

At the same time, the deposits are becoming increasingly scarce: Saudi Arabia has already chartered dozens of super tankers as floating oil stores. Opec General Secretary Mohammed Barkindo expects all deposits to be filled in May.

The result: “Several producers who have no nearby storage facilities will have to stop production in the coming weeks,” says Michael Salden, head of raw materials at Schweizer Vontobel private bank.

The pressure on oil prices has been heightened in recent weeks by the oil war between Saudi Arabia and Russia. But even the reduction in production by around ten million barrels (around 159 liters) of daily production agreed by the leading oil nations has recently failed to stabilize the oil price.

The fight against the corona virus has locked billions of people worldwide, and air traffic has largely come to a standstill. The International Energy Agency (IEA), for example, is therefore expecting a drop in oil demand of 20 million barrels a day in the second quarter – twice as much as the decision to cut the oil supply.

In a joint statement by the energy ministers of Saudi Arabia and Russia, it was said on Friday that the countries “continue to monitor the oil market closely and are ready to take further measures together with Opec and other producers if this is necessary”.

Saudi Aramco said on Friday that it would reduce deliveries to 8.5 million barrels a day from May 1.

“We see record cuts, but still not enough to bring the market even close to equilibrium,” said Warren Patterson, head of commodities strategy at ING Bank NV.

The expectation of continued weak oil demand in the wake of the corona crisis also confirms new data on the gross domestic product in China, which has shrunk there for the first time since at least 1992. At that point, China had started to publish quarterly growth figures.

More: Saudi Arabia has gambled on oil poker.

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Wall Street closes in plus – Amazon and Netflix are growing significantly

Dusseldorf Wall Street rose on Thursday. The Dow Jones index closed 0.1 percent lower at 23,537 points. The S&P 500 gained 0.6 percent to 2799 points. The technology index Nasdaq Composite benefited from new ones Record levels on Amazon and Netflix and rose 1.7 percent to 8,532 points.

Both the shares of the e-commerce group and those of the streaming service are currently the winners of the corona crisis. Both stocks hit new all-time highs on Thursday. Amazon skyrocketed at times by more than six percent to a value of up to $ 2456 and closed more than four percent higher. Netflix peaked at more than five percent to just under $ 450 and ended the day up nearly three percent.

Poor US economic data yesterday caused Wall Street to fall. The Dow Jones index closed the trading day with a minus of almost two percent at 23,504 points, the S&P 500 also closed about two percent lower at 2783 points and the Nasdaq slipped about one percent to 8393 points.

Of a bleak report of last week’s US unemployment rate, which was published shortly before the start of the Washington stock exchange, investors are rather unimpressed this Thursday. According to this, 5.245 million Americans have applied for unemployment benefits in the past seven days.

Initial applications are considered a “real-time indicator” of the economic situation, as they are published with a delay of only one week. Analysts interviewed by Reuters had previously forecasted 5.1 million. Influenced by the corona crisis, more than 20 million US citizens have registered as unemployed within four weeks.

“The decline in economic activity is breathtaking,” said chief economist Joel Naroff from Naroff Economics. Economists estimate that the world’s largest economic power may have shrunk by up to 10.8 percent in the first quarter. That would be the sharpest decline since 1947. As of today, US President Donald Trump wants to present a plan for the exit from the “Great Lockdown” for the domestic economy.

Company figures from the United States show the serious consequences of the corona measures. For example, the stock market fluctuations of the past few weeks have caused a sharp drop in profits for asset manager giant Blackrock.

Net income fell 23 percent year-over-year to $ 806 million in the first quarter, the world’s largest asset manager said on Thursday. Assets under management declined nearly $ 1 trillion to $ 6.47 trillion by the end of March compared to the end of 2019.

The US bank Morgan Stanley also released its quarterly figures this Thursday. Accordingly, profits plummeted by almost a third to $ 1.7 billion. Nevertheless, the financial institution scores well compared to the competition.

At Goldman Sachs, Bank of America and Citi had halved its profit in the first quarter. With the industry leader JP Morgan he shrank by a good two thirds Wells Fargo by almost 90 percent.

Look at other asset classes

Opec announced on Thursday in its monthly report that it was facing the economic consequences of the corona crisis expect a drastic drop in oil consumption by 6.8 million barrels a dayt. The oil cartel predicts the weakest demand for Opec oil in about 30 years in the second quarter.

Accordingly, a little less than 20 million barrels a day are likely to be in demand from April to June. For March, experts expect an Opec production volume of 28 million barrels per day with a possible capacity of around 34 million barrels per day.

The development is thus viewed less pessimistically than by experts from the International Energy Agency (IEA). The interest group of industrialized countries announced on Wednesday that it expects demand to collapse this year by 9.3 million barrels a day for the current year.

However, the two major oil producers Saudi Arabia and Russia have expressed their willingness to intervene in the market in a joint declaration. If necessary, this could be done together with the other states of the Opec + group, according to a phone call between Russia’s Energy Minister Alexander Nowak and his Saudi colleague Prince Abdulasis bin Salman. After a previous dispute between Russia and Saudi Arabia, the large oil producers had agreed on a joint cut in production in order to stabilize the oil price.

The US variety WTI returned to its 18-year low in March and fell 1.5 percent to $ 19.58 a barrel (159 liters). The announced reduction in production by the major exporting countries appears massive, said Carlo Alberto De Casa, chief analyst of the brokerage firm ActivTrades. “In view of the collapsed demand, it just isn’t enough.”

Against this background, the papers of shale oil producers like Marathon, Occidental or Apache slipped between five and ten percent. They suffer particularly badly from the current oil spill because, according to experts, they only work profitably from an oil price of around $ 50.

United Airlines titles lost 11.5 percent. The airline warned that the number of bookings was practically zero, and there was no rapid improvement in sight.

However, there were price increases in the health sector. At the top of the leading index, the papers of the health care provider and health insurer UnitedHealth were up almost six percent on their previous day’s strength. Abbott Laboratories’ quarterly numbers in the S&P 500 rose by more than five and a half percent. They were clearly better than expected, JPMorgan analyst Robbie Marcus said. He continues to see the pharmaceutical company as one of those companies better positioned to face both the Covid 19 crisis and a possible recession.

After a slump of just over 17 percent the previous day, Bed Bath & Beyond has now risen by 18 percent. The retailer, which specializes in kitchen, bathroom and living equipment, presented its quarterly report the day before the market closed. The numbers were better than feared.

With agency material.

More: Here you can find out how the German stock market developed on Thursday.

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Oil prices with no clear direction – China data burden

“The oil price is at a low point, but the market could pick up again in June”

Singapore Oil prices were mixed on Friday. In the morning, a barrel (159 liters) of North Sea Brent cost $ 28.35 in the morning. That was 53 cents more than the day before. The US variety WTI is now losing a good percent and, at $ 18.03 a barrel, is as cheap as it was last more than 18 years ago. US inventories were rapidly filling as refineries demand less and less crude oil, says Bjornar Tonhaugen, head of the oil business at Rystad brokerage. Nothing will change for the time being despite the planned relaxation of the virus restrictions. The recovery of the US economy takes time.

The expectation of continued weak oil demand in the wake of the corona crisis was underlined on Friday by new data on the gross domestic product in China. GDP there has shrunk for the first time in decades. It is the first negative value since at least 1992 when the People’s Republic started publishing growth figures on a quarterly basis.

The day before, the Organization of Petroleum Exporting Countries (Opec) had announced that it was expecting a drastic drop in demand. This hardly led to any movements.

After all, the International Monetary Fund (IMF) had already predicted a severe economic downturn due to the corona crisis and the International Energy Agency predicted a significantly lower demand for crude oil this week. In the meantime, the price of US oil has dropped to its lowest level since 2002.

After the reduction in production volumes agreed by leading oil nations in historical dimensions could not lastingly stabilize the oil price, signaled Russia and Saudi Arabia are ready to make further cuts.

A joint statement by the energy ministers stated that the countries “are continuing to monitor the oil market closely and are ready to take further measures together with Opec and other producers if this is necessary”.

Here is the page with the Brent Prize, here for STI course.

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Dax closes almost four percent in the red

Dusseldorf The German Leading index Dax ended trading on Wednesday with a minus of 3.9 percent at 10,279 points. After an increase of 14 percent in just five trading days on Wednesday, the German stock market started to reverse again.

Sold today Wednesday apparently many foreign investors bought German shares. Because the Dax increased its minus significantly from midday trading to the opening of the US stock exchange, at the same time the euro slipped to $ 1.0918 during this period. Almost all Dax values ​​went out of the market with a minus.

Weak economic data in the US unsettled investors and also weighed on Wall Street prices. The Dow Jones already opened 2.2 percent in the red and then fell even further.

Investors were in the mood for news that the US industry cut production more in March than it had in 1946. The companies produced 6.3 percent less goods than in the previous month, as the central bank (Fed) announced in Washington on Wednesday. Overall production – to which utilities and mining also contribute – shrank by 5.4 percent.

US retailers’ sales also fell 8.7 percent in March from the previous month due to the corona crisis, the Department of Commerce said in Washington on Wednesday.

And last but not least, the US banks are suffering from the corona crisis: Due to provisions in the billions due to bad loans, the profits of Goldman Sachs, Bank of America and Citigroup almost halved.

In Germany, in addition to the weak US data, speculation that the German government was not in such a hurry to relax contact restrictions in the virus crisis caused the Dax to slide ever deeper into the red. And after having won almost 30 percent since the corona crash low in mid-March.

Just yesterday, the prices of some stocks had made investors forget that the world was in the middle of an economic crisis. So the course of the Tesla-Share more than doubled since mid-March. The Dax 30 values ​​could be about Wirecard have increased by around 35 percent in the past four weeks.

“The current crisis is like an accelerator of trends that have worked before,” says Jochen Stanzl from online broker CMC Markets. It was used as an excuse and pretext by companies that had previously had problems to carry out restructuring that was long overdue. And it is the reason for the crisis winners to expand even faster.

However, there are many crisis losers. For example, the engine manufacturer MTU, which was down 6.9 percent on Wednesday at the Frankfurt trading venue at the close of the stock exchange. The growing number of canceled orders from the US rival Boeing does too airbus– investors nervous. The shares of the European aircraft manufacturer lost around 8.7 percent.

After all: The new infections with the Covid 19 virus appear to be stabilizing or decrease. That is why there is talk in many, but not all, countries of easing contact barriers. Governments and central banks are throwing huge support packages on the market and pledging to do more when in doubt. So are you okay?

“I’m afraid the real reality check could still come,” says CommerzbankForeign exchange analyst Antje Praefcke. The market had put up with the previous “shockers” like the US labor market figures relatively well. So far, however, they would not have reflected the full extent of the effects of the “century recession”.

Many questions would remain unanswered: Are the production and supply chains really recovering quickly? Does consumer behavior change permanently? What about the recovery of the economy? “The big end could still come and give the market another cold shower,” says the analyst.

Investor sentiment also expects a sell-off on the German market, even if this may no longer push the Dax towards the 8200 point mark. “Investors should not run after the rising prices,” advises Stephan Heibel after evaluating the Handelsblatt survey Dax-Sentiment.

Meanwhile, there are increasing voices that the stock market lows from the end of March will be tested again. Should such a correction set in, there is a risk of a loss of 20 percent or more, depending on the market.

The problem with such forecasts: If a unanimous opinion has formed, it usually turns out differently. As a result, a full-fledged bear market is threatened with new lows, or the bear market is already behind us.

Look at the individual values

Varta: The battery manufacturer’s share, which traded almost nine percent lower on Wednesday at the close of trading, is moving into the focus of hedge funds that are betting on falling prices. The five participating funds have increased this speculation to 6.31 percent of all freely tradable shares in the past few days – a comparatively high ratio.

Such a short sale, as it is called in the technical language, consists of two different trading activities. For one thing, a hedge fund borrows from you Varta-Shareholder (for example, a mutual fund) share certificates and sells the papers.

Apparently that has happened in the past. On March 31 and April 8, for example, the Varta price fell in the meantime by a double-digit percentage – and this with a high trading volume. Last month, the average volume was around 272,000 pieces per day. On March 31, however, almost 750,000 Varta papers were traded, and on April 8, more than 484,000 pieces.

On April 9, the hedge fund Maplelane Capital reported that it had reached a short sale rate of 0.5 percent. Quotas below 0.5 percent do not have to be reported to the Bafin financial regulator.

But now the second trading activity is pending. The hedge funds must buy back the shares as cheaply as possible and return them to the lender. Not an easy task, as a small calculation example shows.

Because a short sale rate of 6.31 percent means: 2.55 million shares have to be bought back. With an average daily volume of 272,000 shares, this buy-back must be carefully dosed so that the Varta price does not rise rapidly and puts the hedge funds under pressure. Because they want to buy back cheaply.

Adidas: The addition of a billion dollar government loan does not help the share either. Although the paper had been 1.3 percent higher in pre-exchange trading, the shares dropped 4.7 percent from regular trading. The sporting goods group raised three billion euros from the development bank and major banks. Two-thirds of the remuneration of the Board of Management is deleted, and the dividend is also canceled.

Adidas suffers from the fact that practically all of its own stores in the western world have been closed for four weeks – including those of independent sports retailers. The stock had lost almost 50 percent since mid-February, but has risen by around 25 percent in the course of the stock market recovery in four weeks.

Fraport: The travel restrictions to curb the corona pandemic have at the Frankfurt airport operator Fraport led to a slump in business. The number of passengers fell by 62 percent to 2.1 million in March alone. The development continued in April: In the first two weeks, the passenger volume fell by over 95 percent. At the close of trading on Wednesday, the paper was down 4.8 percent.

Kuka: The Augsburg-based supplier has a large order for 5,000 robots for the car manufacturer BMW pulled ashore. This news initially caused the share to rise by 1.4 percent, but by the close of the stock market it had slipped significantly again and was 3.9 percent weaker from trading.

The systems and other technologies for the automation of production are to be delivered to BMW plants worldwide in the next few years, where they will be used primarily in body construction Kuka With. The two groups did not comment on the order value and the delivery period.

Oil prices are slipping

Brent oil from the North Sea is heading for its 18-year low from late March ($ 21.65): It fell 6.6 percent to $ 27.62 a barrel. The prices had already dropped significantly yesterday.

After all, according to the International Energy Agency (IEA), global oil demand will be weaker in April than it has been in a quarter of a century. It will drop by an average of 29 million barrels (159 liters each) a day, the IEA predicted in its monthly report on Wednesday.

“April could be the worst month – it could go down in history as black April,” said IEA chief Fatih Birol. A drop in demand of 9.3 million barrels a day is forecast for 2020. Such a sharp drop in demand cannot be compensated for by a reduction in the oil supply, the organization emphasized.

What the chart technique says

Even if the chart technique gives the Dax potential up to 11,030 points: In the short term, the indicators signal falling prices. Because the leading German index is considered overbought after an increase of 14 percent in the last five trading days before Wednesday alone, so it rose too quickly too quickly.

“At least in the short term, the downward risk seems to be higher than the upward chance, especially since the steep, almost four-month upward trend should not last too long,” say the chart technicians at Düsseldorfer Bank HSBC.

The structural picture of the individual Dax 30 values ​​has not yet brightened. All shares are listed below the 200-day line, which signals the long-term trend and underscores the still dominating, overall downward trend.

“When planning wealth, the rule is: never get out completely!”

Here is the page with the DAX course, here is the current tops & flops in the Dax. Current Short sales of investors can be found in our Short sales database.

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Dax slips significantly – shortsellers target Varta stock

Dax curve

View of the Dax curve in the Frankfurt trading hall.


(Photo: dpa)

Dusseldorf The German stock market continues to widen its losses in the course of trading: listed in the afternoon the Dax 3.4 percent minus 10,331 points.

On Tuesday, the index rose 1.3 percent to 10,696 points after a four-hour technical downtime in Xetra trading. At the same time, the leading index reached a new monthly high of 10,820.

Sell ​​today apparently many foreign investors bought German shares. Because the Dax has increased its minus significantly since noon until the opening of the US stock exchange, at the same time the euro slipped significantly during this period by one percent to $ 1.0874.

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Opec countries agree on historical limitation of production

Frankfurt The alliance of oil exporting countries, Opec plus, agreed on Sunday evening after days of negotiations on a historic reduction in oil production. This is reported by the Bloomberg news agency, citing participants in the negotiations. Until recently, the Opec-plus country Mexico did not want to agree to severe cuts in oil production. The remaining 22 Opec plus members had already approved the deal on Thursday. However, Saudi Arabia is said to have insisted that all 23 Opec plus members agree to the deal.

The agreement provides for the countries to cut their daily oil production in May and June by almost 10 million barrels (around 159 liters). This corresponds to around ten percent of global daily production. The members of the Oil Alliance have never withdrawn more oil from the market in one fell swoop.

The cut is the desperate attempt by oil exporters to stop the slump in oil prices. Crude oil has become cheaper by around 60 percent since the end of January. The spread of the coronavirus pandemic and global travel restrictions have caused oil demand to plummet. At the same time, Saudi Arabia and Russia have fought a price war in the past four weeks and flooded the markets with cheap crude oil. The result was a historically unique supply surplus on the oil market and rapidly swelling inventories.

The output from the Opec plus countries in October 2018 will be used as the starting value for the cuts. Saudi Arabia and Russia bear the greatest burden: Both countries plan to mine 8.5 million barrels a day in May and June. These are significant cuts compared to current oil production. The kingdom has to cut its production by around 30 percent, Russia by around 15 percent.

According to the deal, the cuts in production are to be gradually reduced starting in July: in the second half of the year, Opec plus plans to cut its oil production by only eight million barrels a day compared to the April level. From January 2021, the funding cuts are to be reduced to six million barrels. In doing so, the 23-state alliance, Opec Plus, wants to respond to the unprecedented slump in oil demand since the spread of the corona virus.

Fragile oil alliance

It is unclear whether this is enough to stabilize the oil market. The fight against the corona virus has locked billions of people worldwide, and air traffic has largely come to a standstill. The International Energy Agency (IEA), for example, therefore expects oil demand to drop by 20 million barrels a day in the second quarter – twice as much as the now decided cut in the oil supply. Analysts and oil trading houses go even further, expecting demand drops of 30 million barrels a day and more.

The negotiations also reveal how fragile the alliance of oil exporters is. A result was already expected for Thursday. However, Mexico did not want to support the extent of the oil cut. According to the deal, the country should have cut 400,000 barrels of daily production, but only wanted to implement cuts of 100,000 barrels. Mexico’s Minister of Energy Rocio Nahle left the conference call late Thursday evening, initially preventing the Opec plus from officially closing its deal.

On Friday, President Andrés Manuel López Obrador finally announced a surprising and extremely unusual solution: US President Donald Trump had given assurances that the United States would step in and take over more than half of the funding cuts that Mexico will have to shoulder under the Opec plus agreement. However, Saudi Arabia did not want to get involved until the end, especially since it is completely unclear how the neighborhood aid is to be implemented.

In the end, however, Mexico prevailed. The country has to cut its production volume by only 100,000 barrels per. Opec plus members are now cutting their funding by 9.7 million barrels a day, remaining below the 10 million barrels that Saudi Arabia wanted to push through.

For the Kingdom, it was not the only diplomatic defeat on Easter weekend: on Friday, according to the Saudi negotiators’ plan, further oil exporting countries from the 20 largest industrialized countries (G20) should finally join the production cuts.

But the inability to reach an agreement within the Opec-plus also weighed on talks by the G20 energy ministers on Friday. They were unable to agree on binding subsidy cuts on Good Friday. The final statement by the G20 energy ministers has been significantly weakened compared to the draft that Saudi Arabia had drawn up and published by Bloomberg.

The energy ministers have spoken out in favor of monitoring the stability of the oil markets. A passage that provides “corrective measures” should the oil market become out of balance, would not make it into the final version of the G20 final declaration.

More: US banks are apparently gearing up to enter the shale gas industry.

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Why the corona virus slows down the energy transition

Dusseldorf Stable factories, hardly any cars on the streets and only a few airplanes in the air. Corona ensures that greenhouse gas emissions decrease and millions of tons of CO2 are saved. The epidemic has a positive effect on the climate – at least in the short term.

The long-term consequences, however, are far from being environmentally friendly. Experts are already warning of savings on urgently needed investments in green projects. The coming year could therefore be the first since 1980 in which the expansion of solar energy is falling worldwide.

Wind, solar and bioenergy have been on the road to success in the past 20 years. From expensive niche electricity, they have become a mass energy source that is now even competing for coal, oil and gas.

Renewables now account for more than a quarter of electricity generation worldwide. For the past four years, more eco energy has been added than new fossil power plants. This is also due to the fact that renewable energies are becoming cheaper and cheaper. Newly built wind and solar systems are already cheaper in many parts of the world than a newly built coal or gas power plant. 2020 was supposed to be a record year for renewables.

But the corona crisis doesn’t stop at the energy transition either. The difficult situation of the global economy is likely to bring many infrastructure projects to a standstill, including the billion-dollar clean energy investment needed to avert a climate catastrophe by the end of the decade. Green projects are already being postponed or even completely abandoned.

For the global photovoltaic market, analysts from Bloomberg Energy Finance are therefore expecting a significantly reduced expansion for 2020. If an expansion of 121 to 152 gigawatts was previously assumed, it should now be 108 to a maximum of 143 gigawatts. This would be the coming year the first year since 1980 in which the expansion of solar energy is sinking instead of increasing.

The management consultancy Wood Mackenzie also expects a decline in global expansion in wind power – by up to five gigawatts. For companies that are already at their limit, however, a month-long delay in payment could be a problem.

And the sale of electric cars is also likely to stall. The low oil price should also postpone the competitiveness between electric vehicles and combustion engines by one to two years, analysts estimate Morgan Stanley.

Green investments on the brink

There is also a second, much bigger problem: “We see very low oil and gas prices and at the same time we have a falling CO2 price because the energy demand has dropped massively due to the corona measures,” says Feddersen. After just a few weeks, the price of CO2 certificates fell from around 24 to 16 euros. Feddersen believes that those who want to invest in renewable energies will now consider whether they would rather invest in oil and gas projects at low prices.

And governments could also postpone announced funding programs due to the economic situation. If the economy suddenly collapses, climate protection is no longer the most urgent problem – also because nobody wants to spend money on the energy transition.

For this reason, the Berlin think tank Agora is also afraid that “after the corona crisis, there may be a“ reluctance to make investments relevant to climate protection ”. There have long been proposals in German politics, such as postponing the increase in the ticket tax and the CO2 price. In December of last year, the German government decided in its climate protection law to actually introduce a national CO2 price of 25 euros per ton by 2021.

The climate negotiations are also stalling in Europe. However, the EU Commission maintains that it will stick to its timetable. It wants to continue to tighten its CO2 reduction targets by 2030 from the current 40 percent to 50 to 55 percent compared to 1990.

Fatih Birol, head of the International Energy Agency (IEA), suggests that subsidies for fossil fuels be abolished in the process. A kind of “green reboot” as an opportunity after the crisis. Politicians must now take countermeasures and drive the expansion of renewables, energy experts Feddersen also warned.

However, a second major oil price crash within just six years also illustrates the high volatility of the fossil fuel markets and the value that stable, renewable solutions can offer. The stability of regenerative energies could therefore be their greatest advantage in the future.

Given the increasing shift away from fossil fuels in global society, the increasing competitiveness of clean energy and the massive volatility of the oil market, oil companies and governments could at least be persuaded to rethink in the long term.

More: Electricity consumption drops due to corona crisis – with drastic consequences for major customers.

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