Market Reacts to POTUS Contracting COVID-19
October 2, 2020
The energy markets were lower in yesterday’s trading with crude and products down 2.4% to 3.7%. There have been several factors over the last few days helping to add to negative sentiment and prices pulling back. The rising cases of COVID-19 and that impact on demand has continued to be a factor. The market has been pressured by increased production from Libya, Iran, as well as, both Saudi Arabia and Russia recently. When OPEC’s biggest producer and staunchest compliance monitor, Saudi Arabia has pumps out the barrels it brings a lot of thing into question. With these reports of more barrels to market and concern about demand the market sold off. Now the questions begin; is this just a temporary pullback or the start of a downtrend.
Also putting selling pressure on commodities was the dollar trading higher as trader look for a safe haven. With concern about another stimulus package not getting past and the news overnight that the President and his wife tested positive for COVID-19 the market has been risk off. With the risk off sentiment traders look for safer spaces and the dollar and treasuries are two that have seen more activity. The correlation is strong of the dollar up and commodities down so as trader buy the dollar looking for a safer trade it puts selling pressure on commodities.
With weak prices and low demand more energy companies have been talking about staff reductions. Norwegian oil and gas firm Equinor said they plan to cut their exploration staff by roughly 30% globally by 2023 to reduce cost.
Lonestar Resources US Inc filed for Chapter 11 bankruptcy protection Thursday, joining several shale companies that have been impacted by low oil prices. Lonestar, which operates in Texas’ Eagle Ford basin and produced about 14,000 bpd equivalent, had a total debt of $546.3 million as of June 30th and made the move after defaulting on two debt payments. Through the end of August, 36 oil and gas producers with $51 billion debt have filed for bankruptcy this year.
The market is still concerned as no new stimulus bill has been passed.
The US jobs number for September just released this morning was a disappointment as they were expected to increase by 800,000 and were only 661,000.