Quarterly Market Insights - OPEC'S Oil Price War, U.S. Economic Conditions, and more.
April 17, 2020
Our Quarterly Market Insights publication offers a review of the quarter and also our outlook for the coming months. This publication features a “spotlight” topic and also highlights news in the economy, equities and fixed income asset classes with a focus placed on our outlook for the markets and economy.
OPEC's Price War
On April 2, President Trump said Russia and Saudi Arabia were close to reaching a deal to cut oil production after he spoke with Russian President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed Bin Salman. U.S. WTI prices rebounded to around $28 per barrel in early April on hopes for the U.S. to mediate a truce, yet optimism for a deal waned after the OPEC+ virtual summit was postponed by a few days. Additionally, Saudi Arabia’s national energy company, Saudi Aramco, showed it has not yet been affected by U.S. influence after it raised production to a record level of nearly 19 million bpd in the first week of April. If the OPEC+ April summit fails to produce a deal, oil could remain subdued until OPEC’s next scheduled meeting in June.
U.S. Economic Conditions Tumble as Pandemic Wreaks Havoc
Congress passed legislation for a massive $2.2 trillion relief package which translates to approximately 10% of U.S. GDP. The main provisions of the legislation include significantly expanding unemployment insurance benefits; onetime stimulus checks to individuals based on income; and funding for local governments, small businesses, specific industries including health care and airlines, and companies deemed important for national security. Whether the actions by the Fed and Congress will be enough to quickly bring the economy back from this sharp decline will depend upon the severity and the length of time it takes to reopen the economy.