Oil passed 2015 benchmark

13 December, 2016

Crude Oil

The oil prices jump 5% on Monday as the Non-OPEC countries settle on a deal to cut the output by 558K barrels. Russia commits to slash production by 300K barrels/day, which is more than half of the current production. Gains on both benchmarks are past 5% rising to the levels of July 2015.

As the current rally is propelled exclusively by the market’s euphoria over the termination to end the exhausting price wars. But focusing on further growth can be tricky, as it will ride on the supply changes and the demand caused by output cuts.

US Dollar
The US Dollar starts its week with a slide in the run-up to the FED December meeting, which has high expectations of a rate increase by 25 b.p. According to the CME futures data as of December 9th, the market’s projection is at 94.9% for the rate hike in the upcoming meeting and for July 2017 the increased certainty is at 43.6%.  Opposing this positive outlook has been Yellen’s tone, which brings uncertainty and sends the USD to trade 0.16% lower than the Fridays close.

European currency

The European currency seems to move away from the pressure coming after the ECB decision to prolong the QE. Euro rose 0.34% against a basket of other majors, EUR/USD advanced 0.34% consolidating near 1.06 level.

British Pound

The British currency failed to sustain above the 1.26 level, as concerns over the terms of the UK leaving the European Union kerbed the rally attempts. Last week the currency was rising to 1.2750 against the US Dollar but declined the level of 1.26 level, as the EU single market access prospects remain unclear.

Japanese Yen

JPY extended declines, as investors continue to drift away from the low-yield assets and are instead returning to the energy equities. USD/JPY tested 116 level accelerating the decrease ahead of the increase in the US borrowing costs.

Gold

The bullion drops 0.3% ahead of the FED meeting, as higher interest rates dampen the appeal of the safe heaven.

Commodity producer equities

The commodity producer’s stocks surged on the non-OPEC producers deal. Russian Rosneft added 4%, Gazprom rose 5.47%, Lukoil +3.05%, boosting Russian RTS index by 3%. UK Royal Dutch Shell rose 3.4%, BP gained 2%.


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