Oil Dips Below $29

Analisi Giornaliera - 18/01/2016

Crude Oil Prices Drop Further as Iran Prepares to Ramp Exports Higher


On Saturday, sanctions that prevented OPEC member Iran from exporting oil were lifted, with US President Obama remarking that Iran now has the ability to export as much oil as they desire. Oil prices sunk following the announcement, dropping below $29 per barrel as Iran prepares to add 100,000 barrels a day, gradually rising to a little over 1 million additional barrels by the end of the year.

Turkey’s Unemployment Advances Higher

Unemployment advanced in Turkey for the month of October, rising to 10.50% after missing expectations of 10.30%. Unemployment reached a 7-month high, climbing above September’s reading of 10.30%. Year over year, the number of jobless people reportedly increased from 3.043 million to 3.147 million over the period as the Turkish economy dealt with worsening global trade conditions. The Turkish Statistical Institute largely attributed the increase to the advance of the minimum wage which was boosted from approximately $310 to $425.  This feat, while beneficial, has impacted hiring by employers and may add to rising pressures on unemployment for the remainder of 2016. The Turkish Lira gained briefly over the US dollar, with the pair dropping as low as 3.0377 before resuming the prevailing longer-term uptrend that remains intact.


Oil Slips Further

Early in the weekly reopening session oil prices reached new multi-year lows with prices plummeting well below $29.00 per barrel. West Texas Intermediate crude oil deliverable for the month of February fell as low as $28.36 per barrel with the March contract for Brent tumbling to $27.98 before a small rebound to the upside. The thrust downwards was the result of the sanctions being lifted from Iranian oil exports on Saturday after confirmation that the nation met the conditions of the nuclear deal negotiated with major world powers. Middle-East equities nosedived on the news considering the projected impact of more oil production hitting already saturated markets.  By the end of 2016, Iran plans to raise oil exports by approximately 1.10 million barrels a day with the country set to target former European customers and India which is a fast growing oil market.


Europe Still in Surplus

Euro Area aggregate exports rose at an annual pace of 6.00% in November with imports climbing by 5.00% during the 12-months measured. The trade surplus within the Euro Area also recorded expansion, gaining 5.00% during November to rise towards €145.70 billion. Climbing trade and an improving surplus are strong indications that the policy measures implemented by the European Central Bank are having a strong impact, especially thanks to the weaker Euro.  The improved export competitiveness combined with negative interest rates is forcing companies to invest while the substantially lower Euro is aiding regional companies in improving market share.  The ECB will be meeting later this week and is widely expected to keep monetary policy on hold as the Central Bank evaluates the efficacy of the asset purchase program and measures its impact on regional economies


US Retail Sales Shrink

Data reported from the US Department of Commerce showed headline retail sales shrank by -0.10% for the month of December compared to November’s 0.40% gain. Annually, retail sales improved by 2.10% in 2015, compared with a 3.90% gain during the previous year. Despite December being part of the holiday season driving consumption higher, retail sales recorded month over month declines in electronics and appliance stores, grocery stores and general merchandise outlets, according to the data. This is raising concerns that the slowest pace of retail expansion is foreshadowing a prolonged slowdown in the US economy.  Nevertheless, despite weak results at the end of 2015, economists continue to believe the domestic economy will remain robust and continue to grow even amid the mounting risks.  However, a protracted Chinese slowdown and falling equity indices are a strong indication that the fundamental situation is rapidly deteriorating.


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