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On Thursday, the International Energy Agency cut its demand forecast for the second half of this year and the first quarter of next year, noting that the resurgence of the coronavirus in Europe and the United States will weigh on consumption of fuel.
“The vaccines are unlikely to significantly boost demand until the start of next year,” the Paris-based group said.
The first results indicate that the Covid-19 vaccine developed by Pfizer and BioNTech is more than 90% effective on futures contracts on Brent, the world benchmark, above $ 45 a barrel earlier this week – their most high level in more than two months. Traders are betting that a vaccine would encourage a return to travel, increasing the demand for fuel.
“The problem is that the acceleration in demand will not happen just because of the positive news of vaccine trial results,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a recent note to clients.
Producers agree: On Wednesday, OPEC said weaker-than-expected demand in the U.S. transportation sector and lockdowns in Europe would dampen demand for crude this year and next.
“The recovery in oil demand will be severely hampered and sluggish demand for transportation and industrial fuel is now expected to last until mid-2021,” the oil producers group said in its monthly report.
Price outlook: Prices could continue to rise on indications that OPEC members could extend existing production cuts by about three to six months, helping to ease overproduction issues. But the situation in Europe and the United States is a major overhang.
“As is the case with all commodities, oil is a spot asset that must first clear current imbalances in supply and demand before long-term prices can rise,” said JPMorgan strategists to clients last week. “As lockdowns in Europe accelerate and localized outbreaks in the US widen, oil balance sheets will likely be tested further in the next two months.”
These two regions account for one-third of global oil demand, according to JPMorgan.
Overview: The complicated environment surrounding oil prices highlights the difficult math for investors right now. In light of the positive news about vaccines, those with a longer view may begin to feel comfortable acquiring risky assets again. But in the short term, there is still a lot of stress.
A messy Trump-Biden transition is bad for the economy
Trump could help millions of Americans by securing a major economic stimulus package that prevents a wave of layoffs and bankruptcies before Biden takes office, report my CNN Business colleagues Matt Egan and Chris Isidore. However, with Trump’s attention to contesting election results, pandemic assistance has taken a back seat.
“There is broad agreement that the stimulus must be done,” said Eric Winograd, economist for the Bernstein Alliance. “But if people don’t cooperate on the bases, it becomes difficult to see how they can cooperate on the stimulus.”
There is a precedent for political rivals teaming up during a crisis.
In December 2008, Republican President George W. Bush approved a $ 17.4 billion bailout from GM and Chrysler because he did not want the auto industry to collapse before Barack Obama was sworn in.
“I feel an obligation to my successor,” Bush said at the time. “I think it is good policy not to cause him to fall into a major disaster on his first day in office.”
But economists don’t expect a repeat.
“2008 is a good example of how this is supposed to work,” Winograd said. “It is clear that this is not the model we are going to follow this time around.”
After the pandemic, should there be a tax on working from home?
Working from home can be stressful. But there are also perks, from money saved on transportation to convenience and flexibility – and Deutsche Bank’s research team believes that after the pandemic, those who choose to stay home should. start paying their dues.
“The sudden change to [work from home] means that, for the first time in history, a large number of people have disconnected from the face-to-face world while still leading busy economic lives, ”thematic research analyst Luke Templeman said in a new report. ” This means remote workers contribute less to the infrastructure of the economy while still enjoying its benefits. “
A Deutsche Bank investigation found that after the passage of the Covid-19 crisis, more than half of people who have tried working from home want to pursue it continuously for two to three days a week. Templeman argues this will affect the economy as a whole, which was designed to support in-person work.
The answer: To solve this problem, Templeman is proposing a work from home tax on 5% of the salary. It would be paid by employers if they do not provide permanent office space and by employees on a daily basis if they make the personal choice to spend part of the week at home. That would be about as much as they would spend on expenses such as travel and lunch.
“A tax at this rate … won’t leave them worse off than if they had chosen to go to the office,” Templeman said. Governments can spend money on grants for low-paid workers who cannot do their jobs remotely, he added.
Wait, really? A proposal like this is undoubtedly controversial. But as the nature of work undergoes a generational shift, conversations about the consequences (and costs) of change will only become more common.
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Also today: U.S. inflation data from the October 8:30 a.m. ET release, as well as the first jobless claims from last week. Another 735,000 claims are expected for the first time.
Coming tomorrow: DraftKings, which went public during a tough time for sports betting, reports its results.
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