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Interest rate tantrums return

Published Wednesday, March 11th, 2015

Both equites and oil took a hit yesterday. US stock markets fear a rise in interest rates, are not comfortable with a strengthening dollar, can see China slowing down and are only too well aware that the Greek problem is a long way from resolution. When US stock markets wobble the rest of the world’s exchanges follow. The S&P closed down 1.7%, the FTSE 2.5% and the Eurofirst 1%. The S&P is now 3.5% off its highs and both the Dow and S&P have moved into negative territory for the year.

Federal Reserve caution is beginning to look like hesitation. A consensus is building up that forward guidance has turned into forward teasing and the institution is losing credibility. Credibility is also being stretched in Europe over the Greek pantomime and the waivers granted to France in meeting budget and debt targets. A dangerous divide is building up between the ECB and the European Commission with the former accusing the latter of failing to apply rules consistently or fairly.

Oil prices responded to dollar strength with a loss of $2.14/bbl on Brent (56.39) and $1.71/bbl on WTI (48.29). Take around $5/bbl off WTI to arrive at a Bakken price at Clearbook and $15/bbl for WCS at Hardisty with an additional discount to arrive at the wellhead price.

to read the rest of the report, please click here

Posted by David Hufton