US crude oil futures have been bouncing around the psychologically-important $50 a barrel mark the last couple of trading sessions, but have yet to make a lasting breakthrough to the upside, despite some supportive comments from OPEC and further signs pointing to lower US production.
By Peter Martin
Monday, October 12, 2015
In OPEC’s monthly forecasts, released on Monday, the oil cartel predicted global demand of 30.82 million barrels per day for 2016, revised 510,000 barrels per day higher than its previous forecast, noting in the report that ‘this should reduce the excess supply in the market and lead to higher demand for OPEC crude, resulting in more balanced oil market fundamentals.’
Data released Friday showed a continuation in the recent trend of falling numbers of US oil rigs in operation. The Baker Hughes active oil rig count dropped by 9 to 605, for a sixth straight week of declines, which helped US crude oil futures break above $50 temporarily on Friday, achieving the highest intraday price seen since July. Oil futures broke above $50 again in early trading on Monday, but were not able to sustain the gains, subsequently dropping back to $49.24 a barrel, down 0.43% on the day.
Expectations for a Fed rate hike in 2015 are looking a little more back on track following comments made over the weekend by Fed Vice-Chair Stanley Fischer that suggested uncertainty over the global economy has not yet altered the Fed’s view of expected progression for the US economy.
‘We do not currently anticipate that the effects of these recent developments on the US economy will prove to be large enough to have a significant effect on the path for policy,’ said Mr Fischer while attending an IMF meeting in Peru, but stressing that a 2015 lift-off was an expectation not a commitment and ‘the timing of the first rate increase and any subsequent adjustments to the federal funds rate target will depend critically on future developments in the economy.’ While the process of depending on the incoming data is far from anything new, Mr Fischer’s indication that a 2015 decision remains not just on the cards, but an expected outcome will perhaps provide some kind of reassuring base for market participants to operate around.
Focus this week is likely to center on third-quarter earnings, particularly the heavy hitters from the financial sector that report in the next few days. JP Morgan will get the ball rolling after the market close on Tuesday and will be closely-watched as a trend setter because of the company’s global reach and the breadth of its banking services. Bank of America releases earnings on Wednesday, along with Wells Fargo, followed on Thursday by Citigroup and Goldman Sachs. With the struggles of financial stock markets since the summer, particularly in China, the most recent quarter may have proven to be a challenging one for the trading arms of the big banks, though some offset could come away from the investment banking sides from improvements in mortgage and credit card volumes.
With a dearth of macroeconomic or earnings news on Monday, on account of the Columbus Day public holiday, it leaves the market effectively in a wait-and-see approach. Stocks edged lower at the open on Monday, suggesting some small amount of nerves , as we await the corporate earnings to start flowing. Shortly after the opening on Wall Street, the Dow Jones was down 13 points or 0.08%, while the S&P 500 dipped just 0.04% to 2014.1.
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