At the beginning of the week, oil prices increased slightly. This seems to be a reaction to statements made by the head of the world's largest oil company, Saudi Aramco. Amin Nasser believes that demand for oil in Asia is returning to pre-epidemic levels. The price of WTI oil fluctuates at USD 42 per barrel.
In the rest of the world, the opening up of economies may also gradually support an increase in oil purchases. However, Nasser does not believe that there may be a second global collapse in demand. On the supply side, Iraq has announced that it will reduce oil production by another 400 thousand barrels in August and September. In this way, the country wants to compensate for the overproduction of the last three months.
According to the Reuters agency, over 19.7 million people around the world have been infected with the coronavirus, of which over 720 thousand have died. Due to the threat of a pandemic, some countries are introducing restrictions in some regions. In Australia, Prime Minister Scott Morrison said that internal borders are likely to be closed until Christmas. The topic of coronavirus and the political tensions between the US and China may be a concern to investors. Donald Trump also introduced large restrictions on companies cooperating with the owners of Chinese WeChat and TikTok applications. China responded to this by warning the United States that it will suffer the consequences of its actions.
Deterioration of relations between the powers may have consequences on the currency market. Already in the currency options market, the expected weekly volatility on the USD/JPY pair has increased to the highest level in two weeks. In monthly options, it could be seen that investors may be hedging more strongly against a possible fall in the USD/JPY exchange rate. The increase in expected volatility also seems to be affecting the AUD/USD pair, which may be due to Australia's rather high economic dependence on China.
Meanwhile, on the cryptocurrency market, the price of bitcoin seems to be close to USD 12 thousand and the ethereum to USD 400. After last weekend's flash crash, there is only a trace of a sharp decline in the price, but demand seems strong enough to lead BTC and ETH to pre-crash levels. Perhaps after the rally on the stock market, oil, gold, silver, there will come a time for a crypto rally?
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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