President Trump bypassed the Congressional impasse on stimulus by executing a series of executive orders, writes Phil Flynn.
President Trump would not sign the Democrat bill jammed with pork. Instead, President Trump signed and an executive order that created $400 in weekly enhanced unemployment assistance, student debt repayment relief, a payroll tax holiday and an exploration of protections from housing evictions.
At the same time, Congressional leaders begged to have the Republicans meet them halfway so they could get some of their desperately wanted stimulus spending.
President Trump went around the Democrats, setting the stage for a potential stock and commodity market rebound. On Fox News Sunday, house Speaker Nancy Pelosi said she agreed with Republican Sen. Ben Sasse of Nebraska that Trump’s actions were “unconstitutional slop.” Of course it was President Obama who embraced slop by saying, “We’re not just going to be waiting for legislation,” I’ve got a pen, and I’ve got a phone…and I can use that pen to sign executive orders and take executive actions and administrative actions.”
Yet the oil market, after two down days, seems to be taking Trump’s executive action as a positive. It is also helping the global oil demand that is on the rise. Bloomberg News reported that, “crude market in Asia is almost back to pre-virus levels, Saudi Aramco Chief Executive Officer Amin Nasser said Sunday. Meanwhile, oil drilling in the United States fell to a 15-year low, and the number of active global rigs is at a record low, as explorers abandoned growth plans and as billions of barrels from old discoveries became worthless.”
David Gaffen of Reuters writes that, “The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the Coronavirus pandemic caused a drastic fall in fuel prices and demand. The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30% worldwide and remains below pre-pandemic levels. Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic that has killed more than 700,000 people.
Big oil has reduced output by more than 1.0 million barrels of oil a day, and with the hit they have taken, the assumption is that their production will continue to fall.
In the meantime, the commodity backdrop is still positive. With Trump’s stimulus and global yield falling, the outlook for commodities is strong. The strength in gold and silver will, at some point, trickle down to oil; or at least give us a floor.
Trade strategy may be key to ride out the crazy moves that will come with the headlines so keep in touch with our daily analysis. Makes sure you are getting my Daily Trade Levels! Read Phil’s energy report at Price Futures Group. Twitter: @energyphilflynn | Facebook: Phil Flynn. Not a Subscriber but want to be? Here! I will be a speaker at the Money Show in Las Vegas! I look forward to seeing you there.
