Oil prices start the week on the rise; it was influenced by orders signed by Trump – Sectors – Financenet

The price of Brent futures on the London Stock Exchange in October reached 44.89 dollars per barrel, which is 0.49 dollars more than during the previous trading session. Oil prices fell 1.5% last week to $ 44.4 a barrel.

Meanwhile, WTI’s September futures on the New York Stock Exchange fell 1.48% last week to $ 41.83 a barrel.

It is noted that one of Trump’s orders provides for the partial provision of additional payments for unemployment benefits. Such payments will go to tens of millions of Americans who have lost their jobs due to the coronavirus pandemic. The additional support is expected to be $ 400 per week, 75% of which will be covered by the federal government and 25% by the state authorities.

Other orders include the abolition of tax payments for people earning less than $ 100,000 a year, as well as the extension of various student loan repayment terms.

The relatively positive response to such orders suggests that investors expect payments to support the economy and the population before Congress acts, Axicorp experts say.

The oil market this week will focus on US-China trade talks, which will also address issues related to China’s energy imports.


Prospect of pandemic easing supports US stock markets

Frankfurt The prospect of loosening corona restrictions in some U.S. states supported prices on Wall Street on Friday. However, due to the overall gloomy economic forecasts, there was no real mood to buy.

The Dow Jones gained 1.1 percent to 23,775 points. The technology-heavy Nasdaq advanced 1.7 percent to 8635 points and the broad S&P 500 increased 1.4 percent to 2837 points. On a weekly basis, the Dow gained about 1.1 percent, the S&P 1.4 percent and the Nasdaq just under 1.7 percent.

Georgia is the first federal state to lift the lockdown, although President Donald Trump did not approve the timing. Governors from Texas, Tennessee, Ohio and Montana, for example, also announced plans to allow business to resume quickly for some jobs.

“We have passed the peak and slowly but surely all countries in which there have been no major cases will gradually reopen,” said Thomas Hayes, managing member of the asset manager Great Hill Capital. “The market sees this as a signal that demand will come back.”

But the prospects for the global economy remain bleak. The US industry is experiencing a massive drop in orders as a result of the corona crisis. Orders for consumer goods such as airplanes and machines dropped by 14.4 percent in March. Economists surveyed by Reuters had expected a drop of 11.9 percent.

In Europe, investors were disappointed by the EU’s contingency plans to combat the aftermath of the pandemic. The Dax lost 1.7 percent to 10,336 points, the EuroStoxx fell by around one and a half percent.

Prices went up and down on the oil market. After a loss of around five percent, a barrel (159 liters) cost $ 16.86, around two percent more than on Thursday. North Sea oil of the variety Brent was quoted at $ 21.60. The price for the main US brand WTI then stabilized around $ 17. Oil stocks like ExxonMobil and Chevron reacted with further moderate profits.

Analysts are not giving the all-clear after the historic price collapse at the start of the week. “The extracted oil simply has no place where it can be stored,” said Bjornar Tonhaugen, who is responsible for the oil market at the Rystad Energy analysis company.

Because of the pandemic, oil demand has plummeted 30 percent. At the same time, the camps are filled to bursting, particularly in the USA.

The unprecedented drop in the price of oil at the beginning of the week is the subject of investigations by the US derivatives regulator (CFTC). “In such a situation, we are looking into all sorts of explanations,” CFTC Commissioner Dan Berkovitz told Reuters on Friday. Because of the extreme price fluctuations, you will take a closer look this time. In the United States, such an investigation can take years.

Focus on individual values

One of the biggest losers in the US stock market was stocks of Boeing, which gave around 6.4 percent. According to a newspaper report, the aircraft manufacturer plans to cut the production of its Dreamliner model 787 in half.

In addition, the planned purchase of the commercial airline division of the Brazilian airline threatens Embraer to burst in view of the rapidly falling market value of both groups. There was a blockade on the $ 4.2 billion deal, and fate is uncertain unless a breakthrough is found quickly, people familiar with the talks said.

Papers from Intel tended to go down in the course, then close 0.4 percent up. The chipmaker had forecast earnings below expectations for the second quarter.

Given the general situation, it is not surprising that the group has also cashed in its annual forecast, the analysts from Cowen and Company judged. However, it is surprising that the structural drivers for growth in the first quarter apparently no longer exist in the second quarter.

The shares of Facebook at the same time increased by 2.7 percent, while the papers from zoom Video communications, which had risen to a record high of $ 181.50 at the start of trading, plummeted 6.1 percent. In view of the rapid growth of video chats in the corona crisis, Facebook does not want to leave this terrain to the rising zoom and counters with its own offer.

The fuss about the Ebola drug Remdesivir from Gilead Science, which is currently being tested in the treatment of lung disease Covid-19, did not go on too long that day. According to the manufacturer, the fact that the administration of the drug in China did not lead to a noticeable improvement in patients, as was reported on Thursday, is not meaningful

The study was terminated prematurely due to low participation and therefore has no statistical value, it said. Gilead’s stock, which had dropped a little more than 4 percent the day before, eventually recovered by 2.4 percent after further losses initially.

The share certificate from Beyond Meatwhich rose for the seventh day in a row. Cooperation with has been particularly strong since Tuesday, after the meat substitute manufacturer had announced Starbucks want to enter the Chinese market. Overall, the paper has risen by almost 40 percent since this announcement, nine percent of which this Friday alone.

After a weaker start, trend-setting ten-year government bonds on the US bond market finally rose by 3/32 points to 108 20/32 points and returned 0.590 percent. The euro was trading around the $ 1.08 mark in US trade and was priced at $ 1.0815 at the close on Wall Street. The European Central Bank set the reference price at $ 1.0800 (Thursday: 1.0772). The dollar thus cost 0.9259 (0.9283) euros.

More: Read here how the German stock market ended the week.


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.


US stock exchanges hardly change – Gilead Sciences weighed down

Dusseldorf The US stock exchanges closed little changed on Thursday. Relief from US economic data initially supported Wall Street. A media report on disappointing test results with the remdesivir agent for the possible treatment of Covid-19 then depressed the mood in late trade.

The standard value index Dow Jones closed 0.2 percent higher at 23,515 points. The technology-heavy Nasdaq stagnated at 8494 points. The broad S&P 500 lost 0.1 percent to 2797 points.

Last week, 4.4 million Americans applied for US unemployment benefits. In the previous week, however, the number of initial applications had been around a million higher.

The markets rated this as positive, even if a recession could not be averted, said Steven Blitz, chief economist for the USA at the research house TS Lombard. Investors appear to be betting that the economy will recover quickly if the restrictions to curb the coronavirus pandemic are relaxed.

However, Peter Cardillo, chief economist at Spartan, advised against excessive expectations. “The worst of the pandemic is probably behind us,” said Peter Cardillo, chief economist at Spartan. “But with the oil price at the current level, there is a threat of a wave of layoffs in the US energy sector, which will nullify the effects of a restarting economy.”

The US crude oil grade WTI rose 23 percent to $ 16.95 a barrel (159 liters) after its price fell below zero for the first time at the beginning of the week. At the beginning of March – before the outbreak of the virus crisis in the USA and before the price war between Saudi Arabia and Russia – WTI had still cost twice as much.

This drop in price is a problem especially for shale oil producers. According to experts, because of the complex fracking process, they only work profitably at a price of around $ 50.

Focus on individual values

Nevertheless, investors also accessed these values. The shares of companies like marathon, Occidental or Apache won up to eleven percent. The papers of the oil multinationals Exxon and Chevron each advanced about three percent. The paper from the company active in health care was also among the top values UnitedHealth with plus 3.0 percent.

The titles of Las Vegas Sands, which rose by around twelve percent. The casino operator expects the important Asian business to recover quickly as soon as the travel restrictions there are lifted. Competitors’ shares Wynn and MGM won up to 8.6 percent.

Eli Lilly shares jumped to a record high at $ 162.56. With a smaller plus of 2.1 percent to $ 159.93, they finally went out of the day. Investors recognized the 40 percent year-over-year increase in sales of the blockbuster drug Trulicity for diabetes to a quarterly record of $ 1.2 billion.

By contrast, the shares of Target, even though the retailer’s online sales almost quadrupled in the past quarter, making up for lost business from closed stores. However, the company warned of shrinking profit margins due to wage increases for employees. Target shares lost 2.8 percent.

The titles of Crocs even slipped by more than 16 percent. Known for its rubber slippers, the shoe manufacturer fell short of market expectations with quarterly sales of $ 281.2 million and earnings of $ 0.16 per share. The company also warned of further losses in the current quarter due to virus restrictions.

Among the losers Gilead Sciences with a discount of 4.3 percent. The company denied a media report of disappointing test results with the remdesivir agent for the possible treatment of Covid-19.

The study in China was terminated prematurely due to a lack of participants and was therefore not statistically meaningful, the US pharmaceutical company explained. The Financial Times has presented the process inappropriately, the World Health Organization accidentally posted a draft clinical trial on the Internet. The UN organization confirmed the breakdown and said the document had been removed after the error became known.

Quarterly reports were also in view.

Air Products & Chemicals Withdrawn the 2019/20 financial year forecast for earnings per share from the figures. The industrial gases manufacturer’s paper then gave way by 1.5 percent.

The chip manufacturer’s quarterly report, which was announced after the market closed, was also eagerly awaited Intel, whose shares in the Dow lost 1.8 percent. Intel ultimately disappointed with its earnings outlook for the second quarter, whereupon the papers gave in even more after-hours.

The share certificates of Snap down. The makers of the photo app Snapchat want to get $ 750 million (695 million euros) of fresh money on the market in the face of the corona crisis via convertible bonds.

In the US bond market, trend-setting ten-year government bonds rose 5/32 points to 108 16/32 points and returned 0.603 percent. The euro exchange rate went up and down in US trade and ultimately slid below the $ 1.08 mark again. At the close on Wall Street, the common currency was $ 1.0771. The European Central Bank set the reference price at $ 1.0772 (Wednesday: 1.0867). The dollar thus cost 0.9283 (0.9202) euros.

More: Read here what moves the German stock market on Thursday.


Wall Street gets off to a good start – US unemployment figures have dropped

Wall Street

The New York Stock Exchange is located on the famous street.

(Photo: AP)

Dusseldorf The declining number of first-time jobless claims in the US seems to be giving investors hope that the economy will quickly recover from the corona shock. The Dow Jones started the trading day with a profit increase of around one percent at 23,543 points. The situation was similar at the start of trading for the S&P 500 (2810 points) and the Nasdaq (8529 points).

The prospect of further stimulus from the US government had prompted investors to buy stocks again on Wednesday. The standard value index Dow Jones closed two percent higher at 23,475 points. The technology-heavy Nasdaq advanced 2.8 percent to 8495 points. The broad S&P 500 gained 2.3 percent to 2799 points.

As announced on Thursday, the number of first-time job applications in the US has decreased compared to the previous week: by April 18, 4.4 million Americans had registered unemployment. Previously, 5.2 million people applied for new support. In the meantime, 26 million people have lost their jobs within a month.

However, it is certain that the corona pandemic thus slowed the positive development of the US labor market: In February, the USA celebrated the lowest unemployment rate in decades, and until March, initial applications were regularly below 100,000 a week. Some analysts estimate the US unemployment rate as high as 15 percent.

Look at the individual values

Of the Casino operator Las Vegas Sands expects the important Asian business to recover quickly as soon as the travel restrictions there are lifted. Las Vegas Sands shares then rose 13 percent, while competitors Wynn and MGM gained up to 12 percent.

Things looked worse with the papers from Target out. Although the retailer’s online sales almost quadrupled in the past quarter, thereby compensating for the losses due to closed stores, the share came under pressure: the company warned of shrinking profit margins due to wage increases for employees. The Target shares lost 5.9 percent.

With agency material.

More: Read here what moves the German stock market on Thursday.


Wall Street on the upswing after oil price collapse

Dusseldorf After the turmoil of the past few days, Wall Street is breathing a little more. The prospect of further stimulus measures on Wednesday lured investors back into the US stock market. The standard value index Dow Jones closed two percent higher at 23,475 points. The technology-heavy Nasdaq advanced 2.8 percent to 8495 points. The broad S&P 500 gained 2.3 percent to 2799 points.

Impaired by the historic oil price chaos, the Dow Jones ended Tuesday trading 2.7 percent lower at 23,018 points. The technology-heavy Nasdaq dropped 3.5 percent to 8,263 points. The broad S&P 500 lost 3.1 percent to 2736 points.

“Stock markets seem to think that stimulus from governments and central banks will be enough to neutralize the economic damage caused by the coronavirus pandemic,” said Rabobank economist Teeuwe Mevissen. “As long as this mood persists, economic data don’t seem to matter.”

The Federal Reserve (Fed) pumps trillions of dollars into the financial markets through the purchase of securities. In parallel, the US Senate launched another $ 500 billion stimulus package. That is certainly not the last, said analyst Joshua Mahony from the brokerage IG. “US President Donald Trump has demonstrated his willingness to increase debt in the name of economic growth.”

With the overall market, oil stocks also went on a recovery course. They had come under pressure in the past few days because of the price hype of the US variety WTI. The shares of Exxon and Chevron grew up to 3.4 percent.

Look at the individual values

One of the biggest winners on Wall Street Biontech with a course increase of almost 27 percent. The Mainz biotech company, which works together with the US pharmaceutical company Pfizer researching a vaccine against the lung disease Covid-19 has received approval for a clinical study in Germany.

In the USA, too, the active ingredient will soon be clinically tested after approval. While in the Dow Pfizer shares In line with the market, increasing by 1.8 percent, the Biontech stocks listed on the Nasdaq gained almost 27 percent.

The titles of Chipotle, which rose by twelve percent. The strong online business cushioned the slump in the stationary business of the fast food chain, the analysts of the investment bank BMO wrote. The company, which also has branches in Germany, made a surprisingly high quarterly profit of $ 0.18 per share.

The papers from Netflix On the other hand, they fell by 2.8 percent, although the online video store was able to win twice as many new customers as expected due to the coronavirus restrictions. However, the company warned that the boom would slow down as soon as the restrictions on public life were relaxed again.

But that doesn’t change the positive long-term business prospects, wrote the analysts of the asset manager Cowen. They also considered Q2 user numbers to be too conservative because of the still widespread exit restrictions.

Quarterly numbers, among other things Texas Instruments, AT&T and Biogen in front. The chipmaker had lost less revenue and profit in the first quarter than feared, which gave the shares an increase of 4.8 percent. The telecom company’s papers, on the other hand, lost 1.3 percent after a drop in sales and a withdrawn outlook.

Biogen fell by 9.4 percent to the end of the Nasdaq 100. The biotech company was not only in the spotlight with its quarterly figures, but also with its active ingredient aducanumab against Alzheimer’s.

The application for approval of this product is to be submitted later than previously announced. That raised more questions than answers, complained about RBC analyst Brian Abrahams and immediately lowered the price target for the share.

There was also news too United Airlines and Facebook. The shares of the battered airline dropped 7.2 percent because United wants to raise fresh money through a billion dollar capital increase.

Facebook on the other hand, jumped 6.7 percent after strong losses from the previous day. The network giant wants to penetrate further into India and buys almost ten percent of the Jio Platforms for $ 5.7 billion (€ 5.25 billion). This is the subsidiary of a leading mobile operator.

In the US bond market, ten-year government bonds lost 17/32 points to 108 10/32 points and returned 0.624 percent. The euro was trading at $ 1.0820 at the close on Wall Street. The European Central Bank set the reference price at $ 1.0867 (Tuesday: 1.0837). The dollar thus cost 0.9202 (0.9228) euros

With agency material.

More: Read here what happened on the German stock market this Tuesday.


Dow Jones, Nasdaq, S&P 500: Oil price chaos leads to further losses on the US stock exchanges

Oil prices have not yet recovered after the historic crash. This puts pressure on the three most important US indices, they close in the loss zone. .

6 questions to understand the anomaly

How did oil get below zero dollars?

Oil prices are being penalized by the coronavirus pandemic which is crippling global activity, starting with transportation. Added to this is the price war declared by Saudi Arabia almost a month ago. Prices have plunged in recent weeks for the two major market references, the American oil WTI (West Texas Intermediate) and the barrel of Brent from the North Sea. The prices of the two indices are generally quite close, their difference being linked to the quality and the specific crude market.

But Monday evening, the barrel of WTI fell below zero dollar, in negative territory. Unheard of in the history of petroleum. This means that its holders pay to get rid of their crude oil, because of the specificities of the American market.

Oil extraction is very abundant there, the United States has for several years been the world’s leading producer thanks to shale oil. Opposite, consumption is stopped there as in the rest of the world. Consequently, storage capacities are reaching saturation in the United States, notably in the Cushing oil node in Oklahoma. Oil companies no longer know what to do with their crude oil, and smaller companies prefer to pay to get rid of it. The situation is amplified by a double game of speculation, on the variation of oil prices and on storage capacities. Traders in the industry are practicing a game of musical chairs.

Does the contract mechanism amplify the crisis?

The fall of the barrel of WTI was amplified by the imminent expiration of a futures contract. The deadline for the contract to be delivered in May 2020 is set for Tuesday, April 21. Sellers must therefore find a buyer who can physically take possession of the goods while the negotiation of these contracts ends in a few hours. Without buyers, they have to store the oil in order to deliver it later. However, American oil reserves have increased enormously in recent weeks, making storage more difficult and more expensive. In its latest weekly report, the United States Energy Information Agency (EIA) reported an increase of 19.2 million barrels of crude in a single week, the largest weekly increase since these statistics are published. At this rate, American storage capacity should be saturated in mid-May, or even before. And, nobody wants to burden themselves with oil if there is no place to store it. Hence this crazy clearance sale: contract holders are ready to pay to get rid of the goods.

Why did oil briefly return to above zero this Tuesday morning?

The drastic plunge in WTI oil prices on Monday evening is linked to the expiration of the futures contract for delivery in May. The price of a futures contract in fact decreases as its maturity approaches. Tuesday, the situation should change because traders are now interested in the WTI contract maturing in June which posted Monday evening 22 dollars. However, in an extremely volatile market, the movements become difficult to explain. Tuesday morning, the price of a barrel rose briefly in positive territory before crossing the zero mark again.

Why does North Sea Brent not collapse like American crude?

If it also fell, Brent crude was $ 20.43 a barrel. It has certainly fallen by more than 60% since the start of the year but is far from suffering the descent into hell from the WTI. There are several reasons for this: the reference contract concerns delivery in June, therefore at a later date. In addition, outside the United States, storage problems are much less significant.

How long will this counter shock last?

The situation could last a little even if caution is required in a world more unpredictable than ever. Even if activity gradually resumes in some countries, the return to a level of demand and normal consumption is not for tomorrow. Supply did not follow in the same proportions. The reductions agreed by twenty of the largest producing countries, the members of OPEC and their allies, including Russia, are very high, but they will not start until May 1st. At that date, production will be reduced by almost ten million barrels per day (Mbd), or almost 10% of world supply. But that’s only a third of the massive drop in demand, estimated at 30Mbd in April. The imbalance between the overflow of supply and the frozen demand will be far from being compensated. Economists now expect consumption to drop by 10 Mbj for the whole of 2020.

Will the French pay less than a euro for their fuel?

Upon learning that a barrel of oil is literally worth nothing, the French motorist is entitled to wonder if he will benefit from it and refuel at a bargain price. And this even if, confinement requires, it rolls much less. Consumption of road fuels fell 25% in March over a year, according to Ufip (the French Union of Petroleum Industries). Since January 10, a barrel of Brent, the benchmark of the oil market in Europe, fell by 70%, from 68 to 20 dollars. The liter of diesel fuel at the pump, in France, followed this slide, passing during this same period, on average, from 1.4910 euro to 1.2130 euro. Expressed as a percentage, the drop was only 18.6%, compared to 70% for a barrel of oil. The explanation for this difference is well known: the weight of taxes in the liter sold at the pump. On 1.21 euros of diesel fuel including tax, taxes (VAT and TICPE) represent 0.81 euros, recalls Ufip. Or two thirds of the price. There are also 19 cents, in the price of a liter of diesel, which pass on the distribution costs. Finally, on the selling price of a liter of diesel, 21 cents (or only 17.5%) correspond to the raw material. Yet it is not a question of crude oil but of the refined product, listed in Rotterdam, which therefore includes the costs of refining. The fall in the price of crude oil is passed on to the pump price with a lag of a few days to a few weeks, according to distributors. The price at the pump is expected to fall further, but only marginally. And will eventually recover when global demand for crude oil picks up.


Speculation, saturated storage … Why the barrel of oil fell below zero dollar

It is an understatement to say that the American oil market is ass over head. For the first time in its history, American crude oil fell below… zero dollars on Monday. In the evening, a barrel of West Texas Intermediate (WTI) was trading at -37 dollars. Concretely, this means that producers pay $ 37 to give their barrel of oil. The petroleum industry holds the year 1859 for its year zero. Never in the history of black gold has the price of a barrel fallen into negative territory on the futures markets. In just one day, the price of this oil made in the USA and side in New York literally collapsed, going from 24.59 dollars a barrel of 159 liters to… two dollars at the end of the day, before making the big plunge in the negative to finally appear at -37 dollars the barrel. For comparison, it was worth around $ 114 in 2011.

Difficult to understand the why and how of such a situation without making a detour through these famous future contracts used by speculators and other investment funds in most commodity markets. In 99% of cases, these markets give rise to “simple” speculation between investors who bet on commodity prices. In 99% of cases, sellers of coffee, soybean, wheat and of course petroleum oil find a buyer before the contract reaches its expiration date. But this time, the mechanics to speculate has seized up. For several days, many speculators who had bought lots of 1,000 barrels of American oil (WTI) had the greatest difficulty in finding buyers. 24, 18, 10, 2 dollars, the decline may have been rapid throughout the day in most American oil markets … In vain. Not even when these same investors holding these future contracts have entered negative territory, ready to put their hands in their pockets to offer two or three dollars to those who would be willing to take delivery of these bulky barrels.

Speculative “course accident”

Everything changed on Monday at the end of the day, or more precisely at the last hour of the last day of the expiration of these May contracts. “Sif these contracts hadn’t found where to be delivered, then they were delivered to speculators, explains a trader in a Parisian trading room. Obviously not at the foot of their pharmacy … But anywhere else. And not honoring that delivery costs a lot more than selling at a loss, or even paying to get rid of it, and that’s exactly what happened. “

“It’s a simple accident in the world of speculation, considers for its part the specialist in raw materials Philippe Chalmin. To convince yourself, you just have to look at what is happening on the other futures contracts. For the WTI maturing in June, prices oscillate around 23 dollars, the same thing to within a few dollars for Brent listed on the European markets.

Storage capacity saturation

In addition to the peculiarity of this market, the enormous saturation of black gold storage capacity was added. In less than 8 weeks, global demand for oil has dropped from around 100 million barrels per day to less than 67 million barrels per day due to containment and the fall in air transport in particular. Certainly, the oil-producing countries saw the fall in demand. They even tried to adapt, but not quickly enough and too little. Worse, against the backdrop of bickering and other three-strip billiards, the OPEC member countries did only tiny reductions in their production, or fifteen million barrels a day. The last agreement was made on April 11. The markets first bought it, the prices of the world’s largest oil producer (the United States) and those of Saudi Arabia had even started to recover. But the scissor effect did not stop there. Clearly: on the one hand, a drop in demand in a world where more than three billion people are confined and where the coming recession threatens to turn into depression, and on the other, oil producers who continue to pump.

“The United States has planted itself, it should have drastically reduced its oil production, says Philippe Waechter, director of economic research at Ostrum Asset Management. When we look at WTI’s daily production in the United States, we quickly realize that they continue to pump a dozen million barrels a day, no wonder we are there. By trying too hard to protect his boyfriends who have invested in unconventional oil, Trump finally shot himself in the foot. “ And pumping without consuming had only one effect: filling all the storage places to the brim.

Towards chain bankruptcies?

With the collapse in demand for petroleum products, storage capacity is filling up at high speed around the world, including at sea supertankers. The cost of storage is exploding, increasing the downward pressure on prices crude. To the point that the sector is desperately looking for solutions to store the surpluses that are accumulating around the world. The effects of such a situation on the black gold market could quickly turn into a large financial disaster. Because if the United States has become the first producers of black gold before Saudi Arabia and Russia, it is thanks to shale oils and other unconventional liquid bitumen. And especially investments that number in the hundreds of billions of dollars. If the price of WTI were to remain (as low as June, July, August, etc.) as low as in recent weeks, many economists fear chain bankruptcies. The reason ? At less than 40 or 50 dollars, a lot of unconventional oil drilling is not profitable. Finance could quickly burn down what it revered yesterday. At the risk of sinking a little more the world economy.

Vittorio De Filippis


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.