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Price control slipping away from OPEC

Published Wednesday, May 28th, 2014

Global risk assets continued their march higher after better-than-anticipated US economic data buoyed sentiment and helped push the S&P500 to a second straight record close. Investors reacted positively to news that April orders for durable goods climbed 0.8% from a year ago and that US home prices rose in March. Moreover, US consumer confidence ticked higher in May. The weather-related weakness experienced in 1Q looks to be a distant memory as investors adopt a positive outlook for the medium-term with an anticipated strong rebound in US GDP growth for the rest of the year.

Along with improving economic prospects for the world’s biggest economy, growing expectations of policy easing by the ECB continue to underpin risk appetite as traders digest Monday’s comments from Mario Draghi. The market has taken the view that the battle against “lowflation” and a stubbornly strong euro will prompt the ECB to deploy stimulus measures at its policy meeting next week. The only unknown remains whether it will opt for traditional means such as a further rate cut or deploy unconventional methods including negative deposit rates.

The feel-good factor reflected in stock indices failed to spread to the oil markets which largely headed lower. Ongoing fighting in the city of Donetsk and persistent oil related disruptions in Libya did their best to support oil prices. However, figures showing that Iraq’s southern oil exports have so far averaged 2.6 million bbls and are on track for a record high along with the news that Angolan oil exports are set to rise in July weighed on oil prices

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.