BIG MARKET NEWS WEEK 22 DEC – 26 DEC 2014

New Zealand Monday, Dec. 22, 2014 22:45
NZD Trade Balance (MoM) (Nov)
United Kingdom Tuesday, Dec. 23, 2014 10:30
GBP  Gross Domestic Product (YoY) (Q3)
United Kindom Tuesday, Dec. 23, 2014 10:30
GBP  Gross Domestic Product (QoQ) (Q3)
United States Tuesday, Dec. 23, 2014 14:30
USD Durable Goods Orders (Nov)
Canada Tuesday, Dec. 23, 2014 14:30
CAD  Gross Domestic Product (MoM) (Oct)
United States Tuesday, Dec. 23, 2014 14:30
USD Durable Goods Orders (Nov)
United States Tuesday, Dec. 23, 2014 16:00
USD New Home Sales (MoM) (Nov)
United States Wednesday, Dec. 24, 2014 14:30
USD Initial Jobless Claims (Dec 19)
Japan Thursday, Dec. 25, 2014 04:45
JPY  Bank of Japan Governor Kuroda Speech
Japan Friday, Dec. 26, 2014 00:30
JPY  National Consumer Price Index (YoY) (Nov)

 

Related Posts

  • 91
      China Monday, Dec. 1, 2014 01:00 CNY NBS Manufacturing PMI (Nov) China Monday, Dec. 1, 2014 01:45 CNY HSBC Manufacturing PMI (Nov) United Kingdom Monday, Dec. 1, 2014 09:30 GBP Markit Manufacturing PMI (Nov) United States Monday, Dec. 1, 2014 15:00 USD ISM Manufacturing PMI (Nov) Australia Tuesday, Dec.…
    Tags: dec, nov, united, calendar
  • 88
      Japan Monday, Dec. 15, 2014 00:30 JPY   Tankan Large Manufacturing Outlook (Q4) China Tuesday, Dec. 16, 2014 02:45 CNY   HSBC Manufacturing PMI (Dec)Preliminar United Kingdom Tuesday, Dec. 16, 2014 08:00 GBP Bank Stress Test Results France Tuesday, Dec. 16, 2014 09:00 EUR   Markit Manufacturing PMI (Dec)Preliminar…
    Tags: dec, united, nov, calendar
  • 85
        Canada Monday, Dec. 8, 2014 13:30 CAD Building Permits (MoM) (Oct) Australia Tuesday, Dec. 9, 2014 00:30 AUD  National Australia Bank's Business Confidence (Nov) United Kingdom Tuesday, Dec. 9, 2014 09:30 GBP Manufacturing Production (MoM) (Oct) China Wednesday, Dec. 10, 2014 01:30 CNY Consumer Price Index (YoY) (Nov)…
    Tags: dec, nov, calendar
  • 83
    Germany Monday, Nov.24, 2014 09:00 EUR IFO - Business Climate (Nov) Japan Tuesday, Nov. 25, 2014 01:00 JPY  Bank of Japan Governor Kuroda Speech Canada Tuesday, Nov. 25, 2014 13:30 CAD Retail Sales (MoM) (Sep) United States Tuesday, Nov. 25, 2014 13:30 USD  Gross Domestic Product Annualized (Q3)Preliminar United States…
    Tags: nov, calendar
  • 82
    Australia Monday, Nov. 3, 2014 01:30 AUD Building Permits (MoM) (Sep) China Monday, Nov. 3, 2014 02:45   CNY HSBC Manufacturing PMI (Oct) United Kingdom Monday, Nov. 3, 2014 10:30 GBP Markit Manufacturing PMI (Oct) United States Monday, Nov. 3, 2014 16:00 USD ISM Manufacturing PMI (Oct) Canada Monday, Nov.…
    Tags: nov, united, calendar

Could oil drop as low as $20 per barrel ?

How low can it go — and how long will it last? The 50 percent slump in oil prices raises both those questions and while nobody can confidently answer the first question (I will try to in a moment), the second is pretty easy.

Low oil prices will last long enough for one of two events to happen. The first possibility, the one most traders and analysts seem to expect, is that Saudi Arabia will re-establish OPEC’s monopoly power once it achieves the true geopolitical or economic objectives that spurred it to trigger the slump. The second possibility, one I wrote about two weeks ago, is that the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004.

Whichever outcome finally puts a floor under prices, we can be confident that the process will take a long time to unfold. It is inconceivable that just a few months of falling prices will be enough time for the Saudis to either break the Iranian-Russian axis or reverse the growth of shale oil production in the United States. It is equally inconceivable that the oil market could quickly transition from OPEC domination to a normal competitive one. The many bullish oil investors who still expect prices to rebound quickly to their pre-slump trading range are likely to be disappointed. The best that oil bulls can hope for is that a new, and substantially lower, trading range may be established as the multi-year battles over Middle East dominance and oil-market share play out.

The key question is whether the present price of around $55 will prove closer to the floor or the ceiling of this new range. The history of inflation-adjusted oil prices, deflated by the U.S. Consumer Price Index, offers some intriguing hints. The 40 years since OPEC first flexed its muscles in 1974 can be divided into three distinct periods. From 1974 to 1985, West Texas Intermediate, the U.S. benchmark, fluctuated between $48 and $120 in today’s money. From 1986 to 2004, the price ranged from $21 to $48 (apart from two brief aberrations during the 1998 Russian crisis and the 1991 war in Iraq). And from 2005 until this year, oil has again traded in its 1974 to 1985 range of roughly $50 to $120, apart from two very brief spikes in the 2008-09 financial crisis.

What makes these three periods significant is that the trading range of the past 10 years was very similar to the 1974-85 first decade of OPEC domination, but the 19 years from 1986 to 2004 represented a totally different regime. It seems plausible that the difference between these two regimes can be explained by the breakdown of OPEC power in 1985 and the shift from monopolistic to competitive pricing for the next 20 years, followed by the restoration of monopoly pricing in 2005 as OPEC took advantage of surging Chinese demand.

In view of this history, the demarcation line between the monopolistic and competitive regimes at a little below $50 a barrel seems a reasonable estimate of where one boundary of the new long-term trading range might end up. But will $50 be a floor or a ceiling for the oil price in the years ahead?

 

http://blogs.reuters.com/anatole-kaletsky/2014/12/19/the-reason-oil-could-drop-as-low-as-20-per-barrel/

Related Posts