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Lawsuit erased by coronavirus
Crude oil prices have plummeted by about 80% this year as the pandemic has spread across the world and across all sectors of the economy, killing nearly 180,000 people, routing to financial markets and leading to the worst economic crisis since the depression of the 1930s.
The viral outbreak has caused fuel demand to drop by about 30% worldwide and energy companies in the United States, the world’s largest producer, are struggling to find storage for excess oil.
Supply Threat Helps Promote Short Coverage
Prices were backed up later in the week after an announcement by President Donald Trump in which he instructed the US Navy. USA To fire on any Iranian ship that harassed him in the Gulf, although he added that later he was not changing the military’s rules of engagement.
Over the weekend, in an effort to calm the situation, Iranian President Hassan Rouhani said Tehran was closely following the activities of the United States, but would never start a conflict in the region.
Production cuts are coming
Production cuts by producers also supported prices at the end of the week.
Kuwait’s state news agency KUNA said on Thursday that the producer will start cutting supplies to international markets without waiting for the official start of the OPEC + deal on May 1.
In addition, Azerbaijan’s Azeri-Chirag-Guneshli oil project will have to drastically cut production starting in May as the oil producer follows through on its commitments under the deal to cut production, four sources told Reuters.
In addition, Russian oil companies will cut their crude oil loads from the Baltic ports and the Black Sea Novorossiisk in May to 5.42 million tonnes, the lowest level in 20 years, the preliminary loading schedule seen by Friday showed. Reuters.
Weekly forecast
Concerns over collapsing demand due to travel restrictions to contain the coronavirus and a shortage of space to store oil will dominate the news in the near future. However, don’t expect a repeat of Monday’s price shock anytime soon.
Prices could continue to stabilize this week if more OPEC + members announce early production cuts. An escalation of military activity in the Middle East will be an advantage. However, the wild card will be the announcement of production cuts by US producers. This news could trigger a strong short coverage rally.
Demand destruction is expected to continue, but may decrease if the coronavirus curve continues to flatten and as more states and cities begin to reopen. Traders will get more clues to the extent of the damage to demand later this week when the United States releases the anticipated GDP data on Wednesday and the ISM Manufacturing PMI data on Friday.
