Fed’s super-lax monetary policy | 11 September 2020

#WTI:

Oil closed below $40 a barrel for the first time in a month. The upcoming U.S. Labor Day holiday will mark an informal end to the summer driving months and a customary drop-off in demand is looming with refineries soon shutting for seasonal maintenance. COVID-19 flare-ups in various parts of the world threaten a sustained rebound in oil consumption at a time when the Organization of Petroleum Exporting Countries and its allies are returning oil to the market and easing historic output curbs. Meanwhile, key refineries are still recovering from storms that swept through the U.S. Gulf Coast last week. Citgo Petroleum Corp. and Phillips 66Lake Charles refineries in Louisiana may be facing many more weeks of downtime as they wrestle with loss of power and damage related to Hurricane Laura.

Trading recommendation: range 38.01 - 40.89

#SP500:

Federal Reserve Chairman Jerome Powell said that while U.S. unemployment data for August was positive, the economy’s recovery from the coronavirus pandemic has a long road ahead. “We shouldn’t let people lose everything they have and have to move out or be evicted or move in with family. That’s also not going to be good for containing the Covid spread,” Powell said. “I do think we ought to do everything we can as a country to keep those people -- I wouldn’t say make them whole, but I would say to look out for them.” “We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” Powell said. “It will be measured in years.” This is a positive signal for the U.S. stock market!

Trading recommendation: Buy 3395 and take profit 3478.

#GAS:

Gulf of Mexico production and LNG feedgas demand have both started recovering during the week in progress. Offshore production has started to rebound from near-zero to 700 MMcf/d, following almost entirely shutting in 2.2 Bcf/d last week due to Hurricane Laura. However, feedgas demand recovery at the Cameron LNG export terminal looks to be delayed due to widespread power grid damage in Louisiana from the hurricane. Total supplies are down 800 MMcf/d week over week, mainly driven by reduced net Canadian imports after onshore and offshore production saw similar offsetting moves. Downstream, total demand has fallen by more than 5 Bcf/d on the week, with the vast majority of that coming from reduced power burn demand, and bolstered by a second consecutive 900 MMcf/d drop in LNG feedgas demand. This is a positive signal for natural gas!

Trading recommendation: Buy 2.723 and take profit 2.84.