Oil Brings The House Down

Weak demand, primarily from China, has driven analysts to cut their oil demand prospects by about 100,000 barrels per day – bpd. This coupled with record production from OPEC countries, and rising non-OPEC production has brought the prices of WTI beneath the $45 USD mark. The ripple effects went through the markets, erasing stock gains from Monday, and bringing commodity-dependent currencies down.

The US Dollar strengthened as a result, which might also provide additional arguments to Fed doves who want to keep the rates steady. This could further affect the glut in the oil markets, as oil companies with a weak financial position will be able to rely on lower rates for longer to borrow themselves out of a hole. The implications of this could be more drilling that will contribute to the glut because cheap money rules the markets. read more…

Fed Fueled Speculation Does Its Deed Again

Once again the markets suffered the onslaught of Fed fueled speculation on Friday. From the NYSE to the DAX, the FTSE, the CAC and major currencies around the world faced the steepest losses since the Brexit vote, on Friday September 9^th. Although it is widely known that September is a bad month for trading, and many markets tend to struggle through the end of the summer, Friday’s debacle has the Fed’s policy ambiguity fingerprints all over.

On Monday, markets were back up, erasing most of their losses from the previous session. This is due to the fact that Brainard, the last member of the Fed board to speak to the media before the rate meeting – September 20 to 21 – came out against raising interests “too quickly”. That put all the air back in the bubble after some of it escaped on Friday, effectively leaving it poised to burst more aggressively when the Fed finally raises the rates. read more…

BOJ Running Out Of Ammo

Central banks running out of ammo has become one of the most popular clichés out there. You will hear analysts all around telling everyone that all the forms of quantitative easing and interest rate cuts have run their course. That is it, no matter what they do economic growth refuses to pick up and deflationary forces continue to haunt economies the world over. Now, the Wall Street Journal is focusing on the case of the BOJ – Bank of Japan – to illustrate how this is so, with actual numbers.
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Saudi Arabia Dumps Infrastructure Projects Due To Protracted Low Oil Prices

Low oil prices are taking a toll on every oil producing country, including those fighting tooth and nail to squeeze other producers out. Saudi Arabia’s oil price wars with high cost producers in North America and elsewhere, are forcing the kingdom to slash one third of projected project expenditure. This comes at a time in which its leadership is actually trying to diversify its economy away from oil, making the decision somewhat confusing.

This announcement comes after Saudi Arabia declared it will sell a 5% stake in state owned oil giant Aramco, the biggest oil company in the planet. This adds to the confusing kind of shock therapy that the kingdom’s leaders are recurring to in order to diversify their economy. These moves may also show that Saudi leadership does not foresee an oil price rally in the near future. read more…