Not now, maybe later

Market Update: 22 April 2020

As we say goodbye to the May Oil futures, June isn’t looking so crash hot… falling to a low of $6.50 overnight to settle at $13.35 – perhaps sending a message that both demand and storage is low. What it also means is US Shale markets would be hurting and has translated to a 3% fall overnight in US stocks. As you can see below (Oil Curve) though, alike the economy, oil’s demand is in hibernation – yes we could increase storage, perhaps sell Gold Reserves for Oil Reserves (Gold vs Oil spread)? Or just simply don’t pump it out of the ground in the 1st place. Something Saudi Arabia will certainly have to think a bit harder about.

This unsettling has created some smaller wobbles in currency with AUD weaking to 0.6254 overnight and DXY ending +0.3% – it’s a gentle reminder of the road ahead.

If South Korea is celebrating lower oil, it’s not showing it – perhaps of rumours of Kim Jong-Un being in grave health and the unknown the other side who would replace him.

This has occurred despite a US supplementary fiscal plan for small business worth $484bln and promises of more stimulus to come. This looks to be reflected by RBA’s comments yesterday sombre tone that what we’re experiencing now will impact our behaviours for some time – in other words, perhaps there’ll be more heavy lifting to do to regain a positive sentiment.

We’ll start getting some insight into how we are faring more into mid-May with Unemployment, but CPI next week is for Q1 as well as GDP for Q1 not until June.. perhaps ignorance is bliss for now and hopefully by then, we’ll be a more open economy.

Oil Curve – Yellow is the current futures contract compared to 1week ago (Blue) and 6months ago (Red).

Gold vs Oil normalised showing an outperformance by 138%.. perhaps sell Gold reserves for Oil reserves?

Sources: Bloomberg

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