Morning Minutes 5/12/2020

Morning Minutes

Oil Rallies Amid Talk of More Production Cuts

May 12, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

The spotlight this morning is on crude oil with WTI rallying 4.75% toward $25.00/bbl, and Brent gaining 2.3% and trading above $30.00/bbl. Energy traders have reacted positively to press reports that Saudi Arabia is planning to cut its production again in June, this time by another 1 mmbbl/d to 7.5 mmbbl/d.

This voluntary cut, combined with voluntary cuts from North American producers responding to low commodity prices, continues to rein in supply at a time that the plunge in demand could potentially bottom out as economies start to reopen. Oil could remain active over the next 24 hours with US API inventories due late this afternoon and DOE inventories due tomorrow morning.

It’s otherwise a quiet day for business news. US consumer prices fell 0.8% over month in April reflecting recent declines in consumer demand and commodity prices. Earnings are dominated by reports from smaller companies. Speeches from four FOMC members today (Quarles, Harker, Kashkari, and Mester) could attract some attention as investors look for hints on how the Fed feels their monetary support programs are going and if more stimulus could be on the way or not necessary at this time as economies start to reopen this week.

Asia Pacific markets declined overnight with the Hang Seng falling 1.4%, but Europe is up with the FTSE gaining 0.9% and the Dax up 0.3%. US index futures are up about 0.3% with Dow Futures up about 75 points bouncing back from yesterday’s 109-point decline.

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