A new week but an all too familiar focus. On the downside, global infections of Covid-19 continue to rise. Economies continue to suffer in their almost frozen state. Virgin Atlantic and United Airlines are both screaming out for government assistance. Meanwhile the price of oil drops to 21-year lows. Good luck finding storage – there is none left. On the plus side are some signs that a few countries are slowly coming out of complete lock-down. In Denmark, Norway, Austria and Germany certain restrictions are being eased, shops allowed to open and some schools re-opening. Certain states in the US are also starting to relax measures currently in place. It’s a balance between re-opening economies and avoiding a second wave of infections.
Monday’s market focus will very much be on Oil. A 37% slide in the price of Oil futures greets US investors as they begin their day. Demand is at an all time low and storage capacity has completely run out. It’s a bleak picture which gives a good indication as to the current state of the global economy. The DJ opens down almost 500 points or 2%. Similar losses could be found around much of Europe. Gold had dropped as low as 1,672 but would rally to 1,690 as the US day got going. FX would be relatively quiet. GBP would drop to 1.2420 to start the US day and USDCAD would rally as high as 1.4130 at one point due to the lower oil price. What followed was extraordinary even in the midst of a pandemic. The May Oil future collapsed from starting the day at around $17 to dropping as low as -$37. No, that’s not a typing error. That’s MINUS $37. Yes that’s right if you own Oil, you’re paying someone to take it off you. Bit like going to put gas in your car and having your local Shell station pay you for the pleasure. Lack of demand and lack of storage capacity just caused one almighty meltdown. And I confess, I didn’t even know futures could go negative! But they can, so watch out. With the exception of some further weakening in CAD, FX sat largely on the sidelines. Gold would rally back over 1,690 as investors flocked to safety as equities dropped lower, the DJ ending down almost 600 points at 23,650. There’s plenty of literature out there on today’s front month Oil move. Some predict the end of the world; others describe it as a mere short-term blip. One thing is for sure, we don’t want to see that sort of price action for too long.
When putting up a chart I usually attempt to identify a trend or some levels to look at. But today its just one to remember for no other reason than it happened! Today I give you the front-month Oil chart. This is a 15 minute chart which shows the magnitude and speed of today's moves. The black line in the middle is just a reference point - $0! The rest speaks for itself. One for the history books.