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QE launched ECB style

Published Tuesday, March 10th, 2015

The prospects for oil are inseparable from the prospects for the global economy. The global economy runs on four engines – the US, Europe, China and emerging markets. The US engine is in reasonable shape, the Chinese engine is slowing down and in need of maintenance, the emerging market engine is erratic and in danger of stalling, varying from encouraging in India to discouraging in Brazil and the European engine is in intensive care.

The news focus yesterday was on Europe and in particular on the eurozone. The ECB launched QE in a desperate attempt to stimulate sustainable growth and beat off deflation. The euro/dollar rate moved closer to parity and sovereign bond yields weakened with 10-year Bunds falling to 0.34% taking the spread between US and German borrowing costs to a record high. Last week’s bond buyers were yesterday’s sellers to the ECB, pocketing a well signalled profit!

While the ECB was launching its nuclear option the Eurogroup of finance ministers were holding their heads in despair at a set of Greek proposals that their chairman described as “a complete waste of time”. They were not alone in their expressions of frustration at goings on in the eurozone. Ollie Rehn, ex-eurozone Economic Commissioner, made a guest appearance to criticise the European Commission for not enforcing its rules and repeatedly granting waivers to France which he says undermines the credibility of the eurozone.

to read the rest of the report, please click here

Posted by David Hufton