Central Bankers Ready Stimulus to Boost Economic Activity
March 3rd, 2020
OPEC meets this week and members have begun to show up in Vienna and this event will be the news for the next couple days and headlines could help push prices. It was rumors of more cut by OPEC that have helped support the bullish buy back over the last couple days. There has been some indication that OPEC want to take a bigger bite and potentially cut an additional 1 million barrels per day to try and support the market. Russia has been the one who has pushed back on additional cuts recently and the market is still unsure where they fall in this decision. With the impact the coronavirus has had OPEC needs to act and if it is not enough in the eyes of the market it will not matter. The proposed 1 million barrel cut must be a decent number as it has already stirred buying interest. But if OPEC cannot get that done at the meeting the market will well back off.
Bank of America Global Research lowered its 2020 price forecast for Brent and WTI crude oils by $8 per barrel $54 per barrel and $49 per barrel respectively. It said OPRC+ will likely cut its output this week and US oil supply growth could fall to 500,000 bpd year on year in 2020.
Crude oil and refined fuel product pride rose by 3.5% to 4.5% yesterday, which was mainly driven by optimism that OPEC+ will make additional cuts at their meeting this week.
Price were also supported by expectations that central banks around the world are ready to provide momentary stimulus to support economies given the coronavirus outbreak. The US Fed is included in this group as its recent comments make it seem more likely that they will make additional rate cuts.
Consumer hedgers were also buying after the largest weekly percentage fall of 13% last week for WTI crude oil in more than 10 years. WTI crude oil fell from $51.43 down to $44.756 last week.
The stock market also came roaring back yesterday putting in the biggest one day gain in its history. Same story here as buyers jumped in after a big pullback and central banks looking very accommodating in working to stimulate the world economies.