The price of oil up through the decision of the FED

  •   25/03/2020 - 13h25
  •   HARMANT Adeline

On the morning of March 25, 2020, we witnessed a real surge in crude oil prices in response to the major measure announced by the Fed this morning. We suggest that you learn a little more about this news and the likely continuation of this trend in the short and medium term.

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The price of oil up through the decision of the FED
Image copyright: ben klocek - Flickr

The announcement of the Fed and its repercussions on the barrel of oil :

We have therefore learned that the US central bank has finally decided to implement far-reaching measures to boost the US economy, which is currently at half-mast due to the Covid-19 pandemic. Thanks to this announcement, the price per barrel has started to rise again in a very pronounced trend.

It should be remembered that the price of oil has been suffering for some weeks now from the negative effects of fears of the impact of the coronavirus on the world economy and the strategic shift in Saudi Arabia's production policy. Today and thanks to the Fed's announcement of massive monetary support to face the health crisis, black gold is regaining some of the lost points. Indeed, the US Federal Reserve has thus managed to allay fears caused by the lack of agreement between the repopublicists and Congressional Democrats on a massive plan to support the country's economy on Monday and despite important discussions.

In less than 24 hours, the price of a barrel of WTI oil thus gained nearly 15% of its value while the price of Brent crude rose by 10%. It should also be noted that oil prices had reached this week a record low for several years while populations are being confined and travel restrictions are increasingly strict, which drastically reduces the demand for energy and black gold. The price war between Saudi Arabia and Russia has also taken its toll on crude oil.

Thanks to the Fed, many companies will benefit from liquidity to cope with the current and future upheavals caused by the coronavirus pandemic.

 

Will the upward trend continue on crude oil?

Should we expect this upward trend in the oil market to continue? It should be remembered here that gains in this market have suffered greatly from the persistent deadlock in the US Congress. It would therefore appear that this market reaction is only an attenuation of the longer-term consequences of this crisis on the price of black gold.

Indeed and according to analysts, the problem of the decline in activity in the transport sector and especially in aviation will not be solved by this injection of liquidity. We can therefore expect a further fall in the black gold on the commodities market if demand does not take off again.