Technical & Fundamental Oil Reports Specialists

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The good news is that this year will be better than next year

Published Monday, December 21st, 2015

The Fed has played its hand and so far it has not been trumped. (Which inevitably leads one to ponder where interest rates would be if Donald Trump were the President of the Federal Reserve – we can be sure his press conferences would be entertaining if nothing else). The global economy is still intact, no hissy fits, no tantrums and no meltdowns to report. The safety harness has been removed without any early reports of injury. So far, so good. The alarmists have been defeated, the good guys have won.

Can we really be so confident? Have we witnessed a clear victory with the occasional residual skirmish still going on or have we entered into a phony pre-Christmas peace? The poor performance of the US stock markets on Friday with losses of 2% was unsettling as were the explanations. Commentators favoured blaming the fall on investors refocusing on the continued slide in oil prices indicating the feeble state of the global economy as measured by commodity demand. That may be true of industrial metals but the oil problem is one of excess supply, not falling demand. Oil demand growth this year will be close to 2 mbpd.

If oil was the cause of Friday’s shiver it had more to do with the prospect of a wave of defaults and the sector’s importance in business investment. More likely however the sell-off was prompted by concerns about a stronger dollar eroding exports and importing deflation, alongside the fact that when interest rates rise equities have to work harder to receive the same investor attention. There are quite clearly real concerns in some quarters that the Fed’s move is premature. On the other hand Friday’s equity rout could simply have been a result of the stock and index options expiry.

to read the rest of the report, please click here

Posted by David Hufton