Dow Jones sources are reporting that the Saudis are mulling applying oil cuts as soon as possible rather than in May.
Key notes
- Considerations follow US oil prices turning negative.
- Mull applying oil cuts as soon as possible rather than in May.
Lower oil for longer, higher conviction for long USD/CAD
The news follows today’s record drop in oil prices, with the front-month expiration date looming, 21st April, low volumes and sheer lack of storage capacity saw prices drop into negative territory. More on that here: WTI contract expiring on Tuesday plunges into negative territory
The concern for the global economy has just gone up a notch on the doomsday dial. The price of oil is likely to stay lower for longer despite this being May’s contract and June’s in positive territory. However, the fundamentals will be the same, if not worse, by the time of June’s expiry. OPEC+ could not rescue prices before, so why would the markets expect they could with additional cuts that have come too late? Such efforts will more than likely fall on deaf ears at this juncture and it will take a V-shape economic recovery to bring demand back for oil again. How likely is a V-shape recovery though?
Indeed, trying to pick a bottom is never advisable, in any market, and there is going to be more bad news from this industry to follow in coming days, from both upstream and downstream defaults, bankruptcies and burnt traders.
A bankrupt oil market will also weigh on oil-based economies, such as Canada, which makes the upside evermore so appealing in USD/CAD. More on that here: USD/CAD shoots higher to 1.4136 as oil dives into negative territory, literally negative
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