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OPEC hints at 2H 2016 re-balancing

Published Tuesday, June 14th, 2016

The relatively bullish OPEC report failed to support oil prices which were on the back foot for most of yesterday as markets mulled over figures pointing to rising Iranian crude oil production and easing Chinese oil demand. Brent and WTI both settled 19cts/bbl down on the day at $50.35/bbl and $48.88/bbl respectively while NYMEX Heating Oil lost 15 points and RBOB ended the day 234 points lower. The falls would have been steeper had it not been for the reluctance of Nigerian militants to start negotiations with the government though crude prices are down 60cts/bbl at the time of writing following reports that they would be willing to start peace talks via foreign mediators.

Adding to the oil price weakness were global stock markets which picked up where they left off last week and lost further value as concerns of a global economic slowdown and potential Brexit kept investors on edge. The biggest losses were in Asia where fears of a cooling Chinese economy were rekindled by figures highlighting easing growth in fixed asset investment and retail sales. Credit-rating agency Fitch also did its best to sour the mood after cutting its outlook on Japan’s sovereign debt to negative.

The downbeat tone was mirrored in the eurozone and Wall St as Brexit jitters kept a lid on risk appetite after the latest ICM poll revealed that the Leave campaign has extended its lead. Investor reticence ahead of this week’s Fed policy update reinforced the risk-off environment with Microsoft’s $26 billion purchase of LinkedIn failing to lift sentiment. The prevailing cautionary mood continue to underpin strong demand for perceived havens with the yen hitting a three-year high against the pound and euro while 10-year German Bunds have for this first time this morning joined the negative yield club.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.