(22 April 2020)DAILY MARKET BRIEF 1: Eyes on US crude inventories data as weak prices spill to June contracts.

Equities in Europe and US fell about 3-4% on Tuesday, as plummeting oil prices dented the investor appetite. The sell-off continued in Asia, though at a slower pace.

Activity in FTSE (+0.18%) and Eurostoxx (+0.22%) hint at a flat-to-positive start in Europe on Wednesday, but energy stocks will likely remain unloved on disquieting volatility in oil markets.

Large trading volumes caused substantial price swings in the WTI June contract yesterday. Though the roll over crisis is behind, the downside pressures have well spread beyond the May contract that expired yesterday and the anxieties over too plenty of oil are here to stay. Trading halted three times to contain the wild swings in New York yesterday. WTI June contracts settled near the $10 a barrel mark at the time we are writing these lines.

As the storage crisis in oil markets continue making the financial headlines, the EIA data on weekly US stockpiles will inevitably be the key highlight of the day. Data released since the beginning of April revealed that the US crude inventories have risen by almost 50 million barrels in the past three weeks. A consensus of analyst expectations points at another 16.13 million-barrel increase last week, which would only confirm the deepening oil storage crisis in the US and hinder the potential of a positive recovery in the severely depressed oil markets. With the supply-side hopes completely smashed, shorting the Brent/WTI spread in expectation of a price convergence could help hedging the contango during the future roll overs, but it will likely take months before the US oil market dusts itself off. There is mounting chitchats about another OPEC intervention, but at this stage, anything less than a complete halt in production would not do the trick.

By Ipek Ozkardeskaya