WEEKLY ENERGY RECAP: Global focus turns from China to US

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Updated 03 October 2020

WEEKLY ENERGY RECAP: Global focus turns from China to US

The global oil market has entered the fourth quarter on a bearish note after a major sell-off following US President Donald Trump testing positive for the coronavirus.

Uncertainty about the future of the US elections and the possibility of political chaos in the weeks ahead have had a negative impact on prices especially amid enduring concerns about the effectiveness of a new fiscal stimulus package.

Such worries along with tumbling stock markets distracted the market from a number of oil demand positives emerging from China.

Both international benchmarks fell below the $40 barrier as Brent crude dropped to $39.27 per barrel the lowest since early June and WTI fell to $37.05.

Speculators may have been cheered by the downward movement they wanted to see, but it may be short-lived. For them, the third quarter has been tough and the next three months are likely to be equally challenging as prices remain in a relatively narrow trading range.

It may be that their activity remains muted in order for them to preserve their bonuses which are calculated at year end and reflect their performance during the entire year.

The fourth quarter is also typically when most oil refineries start their fall maintenance season, which has a corresponding seasonal impact on crude oil demand. 

It comes as global refined product supplies are extremely abundant, especially following the steep drop in air travel and ahead of what may be a warm winter. The may put further pressure on refining margins amid much lower demand for so called middle distillates which include diesel and jet kerosene.

As a result, some US and European refiners have idled their crude distillation column (CDU) units to deal with excess diesel and jet kerosene supplies. 

With such an uncertain outlook it remain questionable if demand will return next year to pre-pandemic levels.

Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

Updated 27 November 2020

Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

  • Tokyo core CPI marks biggest annual drop since May 2012
  • Data suggests nationwide consumer prices to stay weak

TOKYO: Core consumer prices in Tokyo suffered their biggest annual drop in more than eight years, data showed on Friday, an indication the hit to consumption from the coronavirus crisis continued to heap deflationary pressure on the economy.
The data, which is considered a leading indicator of nationwide price trends, reinforces market expectations that inflation will remain distant from the Bank of Japan’s 2% target for the foreseeable future.
“Consumer prices will continue to hover on a weak note as any economic recovery will be moderate,” said Dai-ichi Life Research Institute, which expects nationwide core consumer prices to fall 0.5% in the fiscal year ending March 2021.
The core consumer price index (CPI) for Japan’s capital, which includes oil products but excludes fresh food prices, fell 0.7% in November from a year earlier, government data showed, matching a median market forecast.
It followed a 0.5% drop in October and marked the biggest annual drop since May 2012, underscoring the challenge policymakers face in battling headwinds to growth from COVID-19.
The slump in fuel costs and the impact of a government campaign offering discounts to domestic travel weighed on Tokyo consumer prices, the data showed.
Japan’s economy expanded in July-September from a record post-war slump in the second quarter, when lockdown measures to prevent the spread of the virus cooled consumption and paralyzed business activity.
Analysts, however, expect any recovery to be modest with a resurgence in global and domestic infections clouding the outlook, keeping pressure on policymakers to maintain or even ramp up stimulus.