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Market Overview
Oil is Coming Up Well from the Bottom
Brent crude prices are coming up from the bottom of last week's prices which were below $16 per barrel to above $26. The emersion of crude prices may also be inflated by existing factors in May. These factors may be the decline of the pandemic that crashed the demand for oil. New case dynamics is weakening and many countries are preparing to ease the quarantine restrictions gradually or even substantially. A majority of European countries have already announced such plans. This may lead to an increase in business activity and the demand for oil.
The overall inclination to risks has increased. The CBOE VIX Volatility Index fell from 47.8 to 31.3 points. This is quite a lot. The demand for crude oil might increase as the driving season may gear up the demand for gasoline.
The Federal Reserve (Fed) unprecedented measures, along with other central banks' stimulus moves, lead to a significant increase in money supply. The dovish rhetoric of the Fed this Wednesday just reconfirmed this trend. The excessive amount of liquidity seems to prompt investments in assets of manufacturing companies including oil production. The liquidity pumping by the Fed has promoted a slight weakening of the US Dollar over recent days. The US Dollar Index the last week up to date, fell from 101 points to 99.5 points, this supported the rebound of crude prices. The market is awaiting OPEC++ to start production cuts as was agreed in April.
All the above factors may likely support oil prices in the coming month. However, a significant rise in prices is hardly to be expected since the supply still sharply outweighs the demand. The reserves of crude are extremely high and storage capacities are close to being fullto the top or unavailable for immediate request at more or less reasonable prices. Any of such risks may restore an excessive pressure on prices. Crude prices may experience high volatility in May, likely moving within the range of $21-34 per barrel of Brent crude.
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