Mega Deals, Vaccines and the Doom of the Oil Market

15 בספט׳ 2020

Financial markets started the week in rather high spirits. The growth of positive sentiments was facilitated by the mega-deals news. First of all, we are talking about NVIDIA's agreement to buy the British chip designer Arm from the Japanese SoftBank Group Corp for $ 40 billion. And although there is still ages before the deal is completed (it will take about 18 months to agree on the deal: it must be approved by the United States, China, Great Britain and the European Union) , it may well change the balance of power in the global semiconductor market.

In addition, Oracle said that together with the Chinese ByteDance, they will ensure the functioning of TikTok in the United States. Thus, Microsoft has lost the war.

Finally, Gilead Sciences has offered to pay $ 21 billion for the biotech company Immunomedics.

Information from AstraZeneca about the restoration of the third phase of trials, as well as from Pfizer about the start of the third phase and the promise of the head of the company by the end of October to provide a vaccine ready for production, also contributed to the positive background.

It should be noted that the markets traditionally work out not actual news, but future expectations. Because from the “here and now” position, there are no particular reasons for buying. The situation with the pandemic on a global scale continues to worsen, which increases the risks of a second or third wave. And this problem is here and now. Besides, here and now it is unsolvable.

Among those who have been consistently unlucky lately is the oil market. OPEC published its monthly report and extremely disappointed oil buyers with the forecasts for global oil demand (expected at 90.2 mb / d, which is 0.4 mb / d lower than previous estimates). And if we add to this the revision of the British BP's strategic forecasts for the peak of oil demand the situation looks even worse. BP expects in the middle of this decade, that the demand for oil will reach its peak, after that it will begin to decline for a long time (oil will be gradually replaced by alternative energy sources). So, in the long run oil market in its current form is doomed.