Weak Demand for Fuel Weighs on Market
August 7, 2020
The current virus stimulus package being debated in congress has made little progress. This is the next thing that will provide some more momentum to energy prices if it can get passed. The energy markets continue to trade in a very tight range with very high intraday volatility, as the daily swings up and down have been frequent.
As the peak driving season is winding down, the EIA calculated gasoline demand at around 8.6 million barrels per day, around 10% lower than a year earlier. Commerzbank analyst, Eugen Weinberg, made the follow comment, “In the medium term the weak demand is likely to weigh more heavily than the positive sentiment (is supportive), which is why we expect prices to correct in the near future.”
Deutsche Bank said it revised up its GDP forecast for 2020, noting that recovery from the coronavirus-induced decline in economic activity was progressing faster than it had earlier expected. The biggest revision came in the euro zone where Deutsche Bank now forecast the economy to contract 8.6% this year compared to the previous expectation of a 12% decline.
The nonfarm payrolls number was released this morning and it was better than expectation at 1.763 million in July and unemployment rate fell to 10.2%. Both of these numbers were better than the outlook of 1.48 million and 10.6%.
The markets are mixed as there is still a lot of uncertainty on many fronts. Equites are softer today as traders do not know how to take the actions being tossed around on Chinese apps, Tik Tok, What Aps and We Chat. President Trump signed a pair of executive orders, coming into force in 45 days, which prohibits US resident from doing business with Chinese-owned Tik Tok and WeChat. The implications of this are unknown but has trades a bit cautious this morning.