Commodity Update March 22, 2021: Oil Prices Slip after a Slight Rebound, Bonds Near 1.70%

Commodity update as of 9:20 local time in Thailand on March 22, 2021

 

Asia Wealth Securities (AWS) stated that WTI crude for April delivery closed at USD61.42 a barrel, up USD1.42 (+2.4%), reflecting war-risk premium on concerns about the eastern unrest after an oil factory in Riyadh Saudi Arabia was attacked by a drone and made a fire. However, no damage has been reported or the apparent impact on oil supply, therefore, AWS recommended only short-term speculation of energy stocks after the stock price plummeted which affected integrated oil, E&P and refineries were returned to have upside from their 5% -10% target.

However, the fundamentals of crude oil prices remain weak from concerns about the extension of time to use the lockdown measure. As well as delays in vaccination in some European countries which will affect the recovery of the overall economy and the demand for oil.

 

The Fed announced it did not renew COVID-19 Capital Break, which will end by the end of Mar 2020. As a result, the 10-year of the U.S. Treasury yield rose to 1.73% due to concerns over the U.S. banks will sell bonds to increase liquidity as early as 2020 (COVID-19 epidemic began).

However, the preliminary assessment results that the Fed also believes that the COVID-19 situation will also affect the economy but not as intense as in 2020, however, the Fed will suggest to change the SLR transition which will be proposed, with the aim of addressing the problem of bank reserves rising from government stimulus programs.

The Funding Relaxation Program for Commercial Banks (Beginning enforcement 1 Apr 2019) is a project that the Fed allows banks in the U.S. can be reduced capital if bonds are held and debt instruments, including the increased lending (Increase liquidity in the market) without bringing the value of bonds, bonds and deposits deposited with the Fed, include in the calculation of the reserve capital that needs to be stored (Leverage ratio) which previously, the Fed expects to use the project to stabilize bond markets during the COVID-19 crisis and help support the commercial banking sector to lend loans in greater amount.