- OPEC reduced its forecast for 2020 crude oil demand by 2.23 million barrels per day.
- The spikes of the US dollar on the Fed Powell reminded the markets that negative rates are not on the agenda.
- The WTI falls into negative territory towards the lows of the week.
Mid-week oil prices fell by -0.93% from a high of $ 26.94 to a low of $ 25.27 in West Texas Intermediate crude oil. However, it is not just one-way traffic, with investors assuming that demand for oil is in free fall, the Organization of the Petroleum Exporting Countries (OPEC) will have to do more to stabilize prices.
WTI surpassed yesterday’s peaks earlier today. Oil futures finished yesterday at a five-week high as falling production levels, as well as progressive demand from countries seeking to open their economies after several weeks of foreclosure, would support higher prices at the future. However, with a combination of a US dollar tear linked to the drop in comments from the Federal Reserve Jerome Powell as well as OPEC further reducing its forecasts for global oil demand in 2020, oil prices were once again back in the red.
OPEC reduced forecast for 2020 crude demand
In its monthly report, OPEC reduced its forecast for 2020 crude oil demand by 2.23 million barrels per day from its April projection, now expecting a decrease of 9.07 million barrels a day this year. What has also shaken the market is the revision of the production of non-OPEC liquids by an “enormous” 2 million barrels per day compared to its previous evaluation.
A drop of 3.5 million barrels per day in non-OPEC production to reach an average of 61.5 million barrels per day in 2020 is a major success for the market, for both upstream and downstream participants, especially in North America. However, prospects and forecasts have been made for world production, including Canada (300,000 barrels per day), Brazil (100,000 barrels per day).
China should pay for role in spreading coronavirus – Navarro
Meanwhile, trade wars are back on the table and it is unclear how bad the global downturn will be, as this tale could not have come at a worse time for the world’s financial markets and commodities . OPEC may not have taken into account a deeper slowdown in its recent forecasts. Earlier this week, White House trade advisor Peter Navarro said China should pay for its role in the spread of the coronavirus.
A bill must arrive for China,
– Navarro told CNBC.
“They have inflicted enormous damage on the world which is still in progress,” said Navarro, and even suggested that the United States could impose new tariffs or withdraw entirely from the phase one agreement which had thrown a milestone in a fierce 18-month battle between the two largest economies in the world and the booming markets.
All FOMC members against negative rates
Meanwhile Fedell Powell’s comments fueled a spike in the American dollar Wednesday, adding further to the bearish case for AUD / USD. Powell noted that the FOMC’s view on negative rates has not changed and reiterated that this is not something the Fed is considering.
“The Fed intends to continue using the tools he has already tried, “said Powell in response to questions at an event hosted by the Peterson Institute for International Economics.
The previous minutes on the negative rate debate indicate that all FOMC participants were against it.