Alquity | 12 to 18 November: Oil’s rollercoaster ride may not be over just yet




Crude oil prices have come under pressure in recent weeks. Since the beginning of 2016, oil prices have been rising driven by economic growth as well as support from OPEC policy. Not so long ago, the POTUS claimed that OPEC was keeping oil prices artificially high by not producing enough oil. To abide President Trump’s wish for lower oil prices, OPEC and some non-OPEC oil producing countries increased oil production, which in turn depressed the price of crude. Furthermore, a rise in US inventories weighed on investor sentiment suggesting that a period of oversupply might prevail. To top it off, the US softened the impact of the sanction imposed on Iran by granting eight countries waivers to purchase Iranian oil. Consequently, last week the price of Brent crude oil for December delivery bottomed out at USD 55/bbl, while the WTI crude oil price for January delivery decreased to USD 65/bbl. If global demand for oil is in fact as strong as the International Energy Agency says, oil prices are prone to recover once the POTUS’ grip eases on OPEC. As long as lower prices for oil persist, net oil importer countries, such as India, should benefit from them.


Developed markets have a light diary for economic data for the week ahead, as no major macroeconomic data releases or policy events are scheduled in the US or in the UK. Japan will publish the October inflation figures, while the Euro Area releases the November PMI indices. We believe it is very unlikely that any of the two would impact financial markets in a meaningful manner. Due to the emptiness of the economic diary, financial markets will closely follow the developments with regards to Brexit and the Italian budget. As usual, President Trump could be the wild card for the week, as his unpredictable tweets and measures can easily upset markets.


Similarly to developed markets, emerging markets face a rather light week in terms of data releases. In Asia, Thai Q3 GDP and Malaysian CPI inflation from October are scheduled to be released. In Latin America, Chile, Peru and Mexico release Q3 GDP statistics. Meanwhile in Africa, South Africa, Morocco and Nigeria publish October CPI inflation. In addition, Nigeria also reveals Q3 GDP and current account figures.

Link to Alquity article

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