Oil Reverses Higher on Friday - DTN The Progressive Farmer

Businesses and sports leagues are canceling large scale events, closing venues and encouraging employees to work from home. The Chicago Mercantile Exchange will close its trading floor end day Friday.

Investors now expect Federal Reserve Committee to cut interest rates to a 0.00% to 0.25% range at their policy meeting on March 18 if not sooner. This would return the fed funds rate to the range where the Federal Open Market Committee maintained it from December 2008 to December 2015.

According to CME FedWatch Tool, markets now price in a 100% probability of another rate cut next week, just days after the central bank reduced its key lending rate to 1% to 1.25% range on March 3.

A promised flood of cheap oil from Saudi Arabia and United Arab Emirates has put further pressure on oil prices this week as the collapse of the OPEC+ alliance now seems inevitable. Overnight reports indicate Russia doesn't appear to be returning to negotiations with the cartel after the country's energy minister Alexander Novak concluded a meeting with Russian oil executives on Thursday.

Earlier this week, Saudi Arabia threatened to raise output to 13 million barrels per day (bpd), with production in February averaging 9.683 million bpd. If realized, the Saudis and UAE would add a combined 3.6 million bpd of crude to world markets, which is equivalent to 3.6% in global oil supplies at a time when the coronavirus has wiped out demand growth.

Goldman Sachs now expects the oil market to reach a record surplus of about 6 million bpd by April, considering a bigger-than-expected surge in low-cost output and a slump in demand triggered by the coronavirus outbreak.

"The accumulation of oil inventories over the next six months could be similar to a build up over 18 months in 2014-16," said investment bank in the note Friday morning.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)

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