Unemployment in the US does not yield
Jobless claims received by the government in order to provide aid to unemployed citizens increased by millions for the eight consecutive week. 2.98 million people requested support due to unemployment last week – a figure that surpassed estimates. Although initial jobless claims have slowed down in the last 6 weeks, they keep increasing by the millions and are still at levels seen in the last two weeks, which is a sign that unemployment continues to increase at concerning rate. With this, more than 36 million people have become unemployed and fears of unemployment having a longer negative effect on the economy increase. Yesterday, Jerome Powell, Chairman of the Federal Reserve, warned about the need to double efforts to shield the economy from a long-term impact caused by the virus. Powell called for greater fiscal packages, even though they are costly for public finances, as it`s important to avoid unemployment from becoming permanent and reducing the likelihood of a massive number of bankruptcies due to low levels of consumption. In his speech, Powell assured the economy faces unprecedented risks and that recovery could be slower than first expected. Regarding the FEDs role, he reiterated that it will use all available tools in order to back the economy, but reaffirmed it will not use negative interest rates.
IEA sees improvement in the oil market
The International Energy Agency published a report in which its perspective regarding the oil market has slightly improved after a historic fall in production this month that allows a better balance between supply and demand. “We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected”, assured the agency, referring to the adjusted levels of production many producers have had to carry out since they would be unable to survive through such low prices. The IEA expects a 12 million daily barrels reduction in production this month, as companies close oil wells and stop production because of low prices. This will take the total global production to its lowest level in 9 years – to 88 million daily barrels. The US industry will be one of the hardest hit by this adjustment. Nevertheless, the cut in production due to low profitability will not be enough to avoid the scenario that includes saturation in storage facilities halfway through 2020. Additionally, high levels of uncertainty prevail in the industry, and a second outbreak of the virus could bring grave consequences. “The heaviest demand destruction may be behind us, but huge uncertainties remain”. The agency estimates demand will reach79.3 million daily barrels in 2Q20, which maintains a surplus production.