Oil jumps more than 3% on Monday as the Federal Reserved announced aggressive asset purchases to support markets.
The central bank said it will continue to purchase Treasury securities and agency mortgage-backed securities
Traders are hoping that this additional support will put a floor under oil prices
WTI crude futures have been cut in half this month as a travel slowdown eats into crude demand, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production.
The rapid decline in prices has wreaked havoc in other areas of the financial markets, as investors have been forced to sell other other assets such as Treasuries or equities indiscriminately to cover losses in their energy positions.
Ed Morse, Citi’s global head of commodity research, believes there’s more downside ahead. He’s forecasting crude below $20 per barrel for much of the second quarter.
“I think it can go much lower,” he said Monday on CNBC’s “Squawk Alley.” “We don’t think the one-two punch is over, particularly on the demand side where the impact on transportation fuels in Europe and the U.S. is just beginning.”
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