Market Eyes OPEC+ Meeting for Developments
April 9, 2020
The weekly jobless numbers will come out this morning and this has become a very watch indicator in the last few weeks and the number of people filing for unemployment has skyrocketed. The estimates for today’s claims number is again in the multi millions and will give an indication how serious the impact of this virus and the subsequent locks down are for people losing their jobs and the US economy. The average estimate for today’s jobless number is 5.5 million.
In the DOE’s inventory update yesterday said that crude oil stocks were up 15.177 million barrels and the crude oil stocks at Cushing, Oklahoma were up 6.417 million barrels. Stocks of gasoline were up 10.497 million barrels and distillates were up 476,000 barrels. These are big numbers and as has been talked about a lot, storage of crude and products is taking place all around the world. The market appeared to have very little reaction to the reports as traders seem to understand that inventories are going to build until producers scale back, refineries slow down, and demand returns.
The market was more engaged on the OPEC+ front yesterday and still is as OPEC+ is meeting today and the market is hopefully we get some news. Yesterday the news came out that Russia was willing to cut some production and that was seen as a good sign and it helped the energy markets rally later in the day. The consensus seems to be that OPEC+ will cut 10 million bpd. So far, the US has said they are not formally joining any production cut but that the free market and the price fall will naturally reduce output and it has already started. This is still a delicate subject debated in the news as Russia and Saudi Arabia have both said they want the US to participate and join in on these cuts. No agreement or any cut less than 10 million bpd will disappoint. Even at 10 million bpd it will not be enough to offset the demand decline and there will still be excess supplies. But the market is so hungry for something positive and optimistic that the news of a production cut will trigger some buying and could rally the market for a little while but without the return of demand the rally will not be sustainable. There are some rumblings that they could cut 15 million bpd and that certainly would set off some buying.
A couple Republican Senators are trying to introduce a bill that would remove US defense system and troops in Saudi Arabia unless it cuts oil output. Senators Kevin Cramer and Dan Sullivan will hold a call with Saudi Arabia on Saturday. It is also being reported that a group of Republicans in the US House of Representatives told Saudi Crown Prince, Mohammed bin Salman, that economic and military cooperation between the two countries is in jeopardy unless the country helps to stabilize oil prices by cutting crude production. These are very interesting times.