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Oil prices bounce back, but outlook is still doubtful - Zeal Capital Market

Oil prices bounce back, but outlook is still doubtful

20-03-2020 07:48

Oil prices have rebounded from 18 years low as countries around the world have implemented more fiscal and monetary stimulus measures to provide more support for the economic recovery and thus improving the outlook of crude oil demand. In addition, US President Trump said that the United States will intervene the price war between Saudi Arabia and Russia at an appropriate time. Those factors strongly support the oil market in this emotional condition.

The US Congress is discussing a massive economic stimulus plan on Thursday to deal with the devastating effects of the outbreak. At the same time, central banks of various countries have taken action to mitigate the economic and financial shocks caused by the epidemic. The European Central Bank launched a 750 billion euro emergency bond purchasing program on Thursday. The Bank of England also announced on Thursday that a rate cut of 15 basis points to a historical low of 0.1%, the second emergency rate cut this month.

The Federal Reserve will operate dollar swap with nine central banks: Australia, Brazil, Denmark, South Korea, Mexico, Norway, New Zealand, Singapore, and Sweden, with quotas of up to $ 60 billion each. For the other major central banks, including the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, the Federal Reserve announced an increase in dollar swap quotas to further inject liquidity in the market.

ZFX analyst Jacob Leung said that although the news looks optimistic, the rebound in oil prices may be just a technical corrections and may not be sustainable. As long as the epidemic is not under control, global crude oil demand will be unknown, and it will take time to observe.