Daily Market Briefing
The weekly oil stocks data from EIA was released yesterday showing a drop in crude oil inventories of 0.745 million barrels (consensus was a build of 4.417 million barrels). Distillates stocks increased by 3.511 million barrels (consensus was 2.857 million barrels) while gasoline inventories decreased by 3.513 million barrels (consensus was 2.216 million barrels). The data deviated somewhat from Tuesday’s API oil stocks report which showed a large build in crude oil stocks.
Data about inflation in the U.S. was released yesterday which showed a decrease of 1.3% in PPI (Producer Price Index) that measures the change in the price of goods sold by manufacturers, a key indicator of consumer price inflation (consensus was a decrease of 0.5%). The risk for the U.S. economy is very high following the coronavirus, according to Fed chairman Jerome Powell in his speech yesterday. However, Powell said that negative interest is not being considered at the moment. In the previous months, the Fed has lowered interest rates multiple times to a level between 0% and 0.25% in order to cope with the coronavirus’ effect on the economy.
According to the head of EIA, it will be at least a year before the global demand for oil is back to the levels pre-coronavirus. A previous forecast from the EIA had the global oil demand down by 9 million barrels compared to last year which will be updated on Thursday.
OPEC published its monthly oil market report yesterday and according to the organization, global oil demand will likely drop by more than 9 mio. barrels per day this year. However, global supply is also expected to decline this year, both due to the production cut agreement by OPEC+, but also due to other non-OPEC oil producers cutting production.