Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
All the Kings horses and all the King’s men, are trying to take fear out of the global economy again. Wild swings in the overnight session were seen as global central banks and OPEC plot to try to soften the blow from the coronavirus fallout. Hopefully they will do a better job containing the economic fallout than China did containing the virus.
Global stock markets after plunging on the night session and then the open rebounded strongly. A report from Bank of Japan Governor Haruhiko Kuroda who said the central bank would take necessary steps to stabilize financial markets. In fact Japan started to buy their own stocks and a record amount of etfs.
Yet a dour report from the Organization for Economic Cooperation and Development temporarily thwarted the enthusiasm. The Wall Street Journal reported the OECD said that, “In its “best case” scenario, the Paris-based research body said the global economy would grow by 2.4%, a weaker performance than the 2.9% expansion projected before the viral outbreak. That lost growth is roughly equivalent to $400 billion. But it said much more severe slowdowns are possible. The global economy slowed in 2019 and was particularly weak in the final three months of the year. Given that starting point, the OECD said the global output might fall during the first three months of this year, putting the economy at risk of recession.”
For oil that slowed us, but for gold, it loved it as margin call selling in gold seems to have abated for the moment. That leaves it up to OPEC Plus to save oil.
Mixed signals from Russia continue. Reports say that, “Russia is ready to cooperate with its OPEC+ partners to support the world oil market, even though it’s comfortable with current crude prices, President Vladimir Putin said. The OPEC+ mechanism, “has already established itself as an effective tool in ensuring long-term stability in global energy markets,” Putin told a meeting with ministers in Moscow on Sunday. The fact that Russia has substantial financial reserves to cushion the impact of turbulence in the market “doesn’t eliminate the need for action, including in cooperation with our foreign partners,” he said.
A proposal by Saudi Arabia to cut output by 1 million barrels is landing us into OPEC plus confusion. Russian Energy Minister Alexander Novak is saying that OPEC has not officially proposed a 1 million barrel cut to them, and they are still contemplating the 600,000 barrels a day cut they had talked about previously. Yet they will act because oil is having its weakest start to a year in over 30. This may be the first time since the 1980’s that we may see no oil demand growth. Traders can find high risk but also potential high-profit potential.
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