The Day at a Glance | April 28 2020

WTI drops again

The West Texas Intermediate (WTI), American crude oil price reference, has fallen a little over 37% in the last two sessions and approaches $10 dollars per barrel. Some funds and investors have started to get rid of their June futures contracts in light of fears that they could reach negative prices in the weeks nearing their maturities. The S&P, Dow Jones, and The United States Oil Fund LP have announced they will sell all of their June WTI contracts and will look for contracts with later dates, this in light of the risk of seeing last week`s episode repeat itself, in which the price of a barrel reached -$40 dollars. The news caused investors to sell their contracts yesterday, which set American crude oil prices under $13 dpb. It`s expected the funds` operations will be complete today, which is why prices have maintained at low levels and reached $10.2 dpb in the early morning. July contracts have had a rally at $19.66 dpb. Movements in indexes and funds increase the volatility in a market that is already under pressure due to the fall in demand and the lack of infrastructure to store oil. In the coast of California, close to 30 million barrels can be found in oil tankers waiting for a final destination, while research company Rystad Energy estimates that close to 90% of the world`s total storage capacity (4.3 billion barrels) is already full.

FED increases municipal debt program; starts meetings

The Federal Reserve decided to increase the purchase of state and municipal debt yesterday, in attempts to channel resources towards counties with at least 500 thousand residents, and cities with at least 250 thousand residents. The total considers $500 billion additional dollars and will increase the number of benefitted local entities from 76 to 261. Additionally, the FED will carry out its monetary policy meeting today, during which more stimuli is expected, considering that practically all of its tools remain active. Markets will stay focused on Jerome Powell`s press conference tomorrow, during which he is expected to provide signals regarding how long interest levels will remain at current levels (0-0.25%). Markets will seek to find information concerning the FED`s long term plans, especially its estimates for recovery and eventually, the interest rate being adjusted. In its most recent statement, the FED assured it expects to keep the rate at its current level until it`s sure the economy has overcome adversity, full employment reaches its target level, and that prices have stabilized; markets seek to know more details about what this recovery period will look like, as well as levels of unemployment the central bank estimates, and its inflationary forecasts.