Commodity markets

Crude oil: super tankers are full

For the first time since January, crude oil inventories in the USA fell marginally. The price reaction was very positive. However, at least in the short term, we consider it excessive. Since some countries are moving into the post-lockdown phase, a recovery in demand in the second half of the year is plausible. However, the „pre-corona level“ remains a long way off. A more sustained stabilization of demand is not expected until 2021. Due to global supply cuts, the oil market will probably turn slightly into deficit in the second half of the year. However, this will at best be sufficient to minimally reduce the very high supply overhang in 2020. However, anyone who is happy about the slight decline in US stocks of 750 thousand barrels is blind on at least one crude oil eye. After all, over 30 supertankers filled with Saudi oil will be landing on the…

Crude oil market reflects economic downturn

We all know that the global economy is heading for a deep recession, which will probably overshadow past crises. On the financial markets, we can see little of this development so far. Although the stock markets fell by a good 40% in the initial reaction, the unbelievably high government pledges to support companies and private households have contributed to a rapid recovery of the stock markets. Equity market valuations are now almost back at the very high levels seen before the Corona crisis. In the bond markets, and especially in government bonds, the virtually unlimited commitments of the central banks are having an effect. There is hardly a bond segment that cannot profit from the purchases of the central banks. Here, too, the effects, in the form of higher government debt or increasing balance sheet risks of companies, are to be seen as very subdued, if at all. However, the…

Gold patient recovers

In the course of the Corona crisis, the gold price also came under pressure at first. Investors sold their gold to compensate for losses in other asset classes. Liquidity was in great demand. In the meantime, however, gold has developed a corona immunity. The gold price has risen by almost 18 percent since its low for the year. The most important medicine was administered to the gold patient by the Fed. The launch of an unlimited bond purchase program and the massive interest rate cuts showed their effect. Memories of 2008/2009 are coming back. At that time, the gold price also reacted very positively to the expansion of the Fed balance sheet. Since the Fed balance sheet has expanded by more than 45 per cent since the beginning of the year, there is much to suggest that the price of gold will continue to rise in the current environment. Investors…

Opec reduction is historical, but not enough!

The fight against the Corona crisis leads to historic measures. Both central banks and governments are trying to use their monetary and fiscal instruments in the best possible way to limit the economic damage. Now, Opec+ is also taking historic measures, cutting oil production by 9.7 million barrels per day (MMBD) in May and June. For the second half of the year, the cutback target is lowered to 7.7 MMBD – from 2021 onward to 5.8 MMBD. The reduction program will run until the end of April 2022, and the USA, Brazil and Canada will also cut their output by 3.7 MMBD. However, one drawback is that the „package of cuts“ compares actual production data with the figures for October 2018. For Russia and Saudi Arabia the so-called reference value is 11 MMBD. However, if one compares the cutback targets within Opec with the current production figures, the actual production…

Oil: Supply side is on the move and China is going bargain hunting!

The epic drop in oil prices is causing the three biggest oil producers Saudi Arabia, Russia and the USA to talk to each other again. Meanwhile, the US president is tweeting and announcing an imminent cut in Opec+ production of 10 million barrels per day. The oil price has risen sharply as a result. Since Wednesday the Brent crude oil price has risen by over 25 percent. However, neither Russia nor Saudi Arabia has confirmed any agreement. Only a virtual special meeting has been arranged for Monday – but nothing more so far. It will not be easy, however, and the US oil industry will have to play its part. If there is no signal here, the remaining OPEC+ countries will also hold back. The increase in American oil reserves could at least be a signal of this kind. However, it would be better if the US frackers could agree…

Oil price falls significantly

The price of crude oil collapses massively. Since Friday, it has fallen by 30%, but it could fall even further in the short term. Contrary to our expectations, Opec and Russia could not agree on a necessary reduction in production within the framework of the expanded Opec (Opec+). This means that the alliance now exists only on paper. However, against the background of the acute weakness in corona demand, a cutback would have been very important and right. The growth in demand is likely to be small at 0.2 MMBD in 2020. Russia’s energy policy motivation is to put pressure on the US drillers. Too often (according to Russian interpretation) the Americans tried to spit the Russians into the „energy soup“. US sanctions against the Russian state oil producer Rosneft in Venezuela as well as sanctions against companies involved in the completion of the Nord Stream 2 gas pipeline are…

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