Fed Cuts Interest Rates By 50 Basis Points
March 4th, 2020
The inventory report from the API said that crude oil stocks were up 1.7 million barrels. The crude stocks at Cushing, Ok were down 1.4 million barrels. Gasoline stock were down 3.9 million barrels and distillates stocks were down 1.7 million barrels.
The average estimates form the Bloomberg survey are for crude stocks to be up 2.901 million barrels. Gasoline stock down 2.239 million barrels and distillates down 1.852 million barrels.
The US Federal Reserve cut interest rates by 50 basis points yesterday in a bit of a surprise move. The cut in rates is generally seen as a boost to energy markets but yesterday energy was trading a bit lower after the news which was somewhat of a surprise. Prices have since rebounded and the market is trading higher again here this morning. Some thought that this cut by The Fed was a strong reaction the impact that the coronavirus is having.
Crude prices are higher this morning and getting support from the thought that OPEC+ will cut production at their meting this week. It appears that Saudi Arabia is marking progress and getting Russia to join in on additional cuts. Reports that are helping to support buying are giving the indication that the cut will be close to 1 million bpd. A number above 600,000 and closer to 1 million barrels per day is what the market wants to see as the demand destruction from the coronavirus in most traders’ minds seems large at this point.
This from IHS Markit. World demand for oil has never seen a decline as dramatic as the one happening now due to coronavirus and the global scope of containment efforts being undertaken. IHS Markit says. ”IHS Markit now expects that Q1 2020 world oil demand will decline by the largest volume in history-even exceeding the declines during the 2009 financial crisis,” it says. “Owning to the unprecedented stoppage of Chinese economic activity in February and the spread of the coronavirus disease 2019 outside of China, we estimate that world oil demand in first quarter 2020 will be 3.8 million bpd lower than a year earlier.”
The average estimates for today’s propane inventory update are that stocks will decline 1.37 million barrels.
Jerome Powell, the Federal Reserve Chair said the coronavirus posed a material risk to the economic outlook yesterday. The coronavirus has infected 92,700 people killing 3,157 people thus far and currently in over 60 countries. In the US there are currently 115 infected and 9 deaths.