Week in a glance: oil growth and the fall of the US labor market

٦ أبريل ٢٠٢٠

Traditionally for the current crisis times, the last week made a number of records. Moreover, the records were quite diverse. We start, of course, with the maximum one-day increase in the oil market history. It was recorded on Thursday after Trump announced in a tweet the resurrection of OPEC + with production cuts from 10 to 15 million b/d. Saudi Arabia on the same day announced the emergency meeting of OPEC and countries not included in the cartel, but participating in OPEC +. As the result during only two days oil grew by 45%. Recall that at the start of last week, we actively recommended and bought ourselves oil near $20 (WTI brand).

However, optimism was somewhat cooled by the skirmish between Russia and Saudi Arabia over whoever initiated the OPEC + breakup. As a result, the meeting was postponed from Monday to Thursday. And later, both Russia and Saudi Arabia, mentioned that without the USA a new OPEC + is impossible. In general, there will be another interesting week in the oil market.

Another historical event last week was the fall of the US labor market into the abyss. It all started on Thursday, when jobless claims showed an unrealistic 6.6 million (as a result, in two weeks the ranks of the unemployed in the USA replenished by 10 million (!), Which was never in the history of the States), and continued on Friday, when the NFP fell through the abyss, showing -701K with a forecast of -100K. By the way on the eve of the NFP, we predicted failure by -500K-600K.

As the record can be considered the reaction of the dollar to the NFP data. Or rather its complete absence. The foreign exchange market really fell into a stupor. But this is even somewhat good. The lack of reaction today does not mean that it will not be tomorrow. Therefore, this week, we will sell with renewed energy in the US stock market, as well as sell the dollar on the entire spectrum of the foreign exchange market, primarily against the Japanese yen. And, of course, we will buy gold. In any case, a re-test of 1700 should take place sooner or later.

Some of the medium-term purchases of oil (those that were over $20) we closed on Friday, but the remaining positions are in the game. The OPEC+ meeting, will almost certainly provoke strong movements in the oil market. So we want to be ready, if possible, to add to purchases, but below current prices, if, of course, such an opportunity appears. The medium-term relevance of oil purchases has not been lost, but, on the contrary, sharply added following the results of the past week. So if it seems to someone that it’s too late to enter the position, we recommend to reconsider this position - the potential for oil growth is far from exhausted.