Petro States Dipping Into Coffers As Oil Price Reality Kicks In
We have nada-nothing-nil on the economic data front today, as is the way after the first-week-of-the-month-economic-data deluge, although Q4 earning season kicks off after hours today with Alcoa up first, as usual. It won’t be until next week, however, when we really get into the full swing of things on the earnings front.
China’s equity market continues to have a torrid time of it, selling off a further 5.3 percent to start the new week. While European and U.S. equities are looking less ruffled by this news, the crude complex is being dragged lower once again – stuck in a tractor beam, being pulled toward the $30 level it would seem. Gasoline is trying to buck the trend, pushing higher after last week’s inventory report-sponsored plunge.
Related: Statoil CEO: Expect Volatility Now, Price Spike Soon
The chart below is from Capital Economics, and it addresses the current issue of Chinese economic weakness.
(Click to enlarge)
The key point they are expressing (via Twitter) is that although China’s financial markets may be in turmoil, their economic indicators for the most part haven’t shown deterioration since the equity market peaked mid-last year:
While oversupply has been a key driver behind the oil market crash over the last eighteen months, another huge influence has been a strengthening US dollar. Hence, regardless of oil market fundamentals, if you think the U.S. dollar is going to continue strengthening this year, then you have to think that oil prices will continue to trundle lower. (Morgan Stanley do).
…click on the above link to read the rest of the article…
