News Out of Asia Putting Downward Pressure on Markets
On Thursday, WTI Crude finished higher even in the face of relatively bearish EIA inventory news. This week will mark the first week of losses with the previous four consecutive weeks of gains in crude. Even with this week’s losses, the month of May is on track to finish with over 70% in monthly gains.
Crude prices are feeling downward pressure in early trading this morning due partially to news coming out of Asia. Fears of a second wave of coronavirus cases arising out of South Korea have caused pause among traders. South Korea has been considered a model in how to cope with the recent pandemic. Many countries have followed South Korea’s lead in testing for the virus, social distancing, and contact tracing. Should South Korea experience a resurgence of the virus, many are concerned that other countries will follow suit.
Chinese-US relations are also dragging down markets this morning. Earlier this week, the US announced that Hong Kong was no longer autonomous from China. This declaration could have far-reaching economic effects for Hong Kong. Hong Kong enjoys special status and considerations from the US because of its prior autonomy from China. The United States may soon terminate its special economic and trading relationship with Hong Kong. While the declaration doesn’t change anything right now, it does suggest that Washington could, in the future, revoke the special status it granted the city in 1992. This friction between the US and China endangers the Phase 1 Trade deal previously agreed to by the two countries and could have lasting long-term effects on US-China relations.
The EIA reported a surprise rise in crude stocks of 7.9 MMbbls, versus an expected decrease of 1.9 MMbbls. At Cushing, the EIA reported that stocks fell by 3.4 MMbbls. Diesel inventories reported another large build, bringing inventories to 24% above the five-year seasonal average. Gasoline reported a small surprise inventory draw. Gasoline inventories are about 10% above the five-year average for this time of year.
Crude prices are down this morning. WTI Crude is trading at $33.13, a loss of 58 cents.
Fuel is relatively flat in early trading this morning. Diesel is trading at $0.9225, a fractional loss. Gasoline is trading at $0.9968, also a fractional loss.
This article is part of Daily Market News & Insights
Tagged: China, coronavirus, Hong Kong, South Korea, trade deal
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