Category:

Lew Cheers Plummeting Oil Prices as ’Tax Cut’ for U.S. Economy

U.S. Treasury Secretary Jacob J. Lew said plunging oil prices are like a beneficial tax cut for the nation’s consumers while having negative consequences for Russia, where energy is a vital source of revenue. “It is a great success story that we are now producing oil in the quantity that we are,” Lew said today in an interview in New York broadcast by CNBC. “The independence that we’ve developed in the energy sector, it is a clear positive if you look at the impact on our economy.” Lew’s comments came after Brent crude fell below $65 yesterday for the first time in five years. The shale boom has driven U.S. output to the highest on a weekly basis since 1983, with oil production up 65 percent in just five years and the country supplying 89 percent of its own energy in 2014. While Lew said the U.S. needs to […]

Posted On : Published By : Tom Whipple
Category:

Oil slide hits European stocks, safe-haven assets sought

LONDON (Reuters) – A relentless slide in crude prices put energy stocks and currencies exposed to oil exports under pressure on Friday, dampening appetite for riskier assets and underpinning flows into the safety of core government bonds. Brent crude dropped to a 5-1/2-year low of $63 a barrel and was set for a weekly loss of more than 8 percent. Falling oil prices have sparked weakness in U.S. high yield markets and pushed up volatility across asset classes. The STOXX Europe 600 Oil & Gas Index fell nearly 1 percent in early trade, dragging down the pan-European FTSEurofirst 300 index to 1,347.45 points. The euro zone’s blue-chip Euro STOXX 50 index declined by 0.8 percent to 3,133.36 points with political concerns over Greece also hurting European stocks. Currencies strongly linked to oil export revenues like the Canadian dollar slumped to a 5-1/2 year trough against the dollar, while the […]

Posted On : Published By : Tom Whipple
Category:

Oil’s Decline Is Far From Confined

So far, few outside the energy sector have been hurt by this year’s oil rout. But the ripples likely have only begun to be felt. Falling oil prices are on balance positive for energy consumers such as the U.S., and with the Dow Jones Industrial Average hitting a new record Friday, investor confidence appears intact. Yet some analysts and investors say a 39% plunge in crude futures since June could lay the groundwork for unpredictable market shifts and increasing price swings, or volatility. In a worst-case scenario, oil’s selloff could ultimately result in a shock akin to the Asian currency crisis of 1997-98. That episode—which started with a devaluation by Thailand—rattled markets and economies around the globe after many traders initially misjudged it as minor and inconsequential. Most investors expect the U.S. economy and global markets to avoid such a fate this time. But the great lesson of the […]

Posted On : Published By : Tom Whipple
Category:

Oil markets search for traction

Oil markets see modest gains, though traction still uncertain following OPEC decision to keep production static in the bear market for crude. (UPI Photo/Monika Graff) NEW YORK, Dec. 3 (UPI) — Good economic data Wednesday helped push oil markets slightly higher, though prices still reflected uncertainty following OPEC’s production decision. Oil markets plummeted last week after the Organization of Petroleum Exporting Countries decided to keep output steady despite a 30 percent loss in crude oil prices since June. In response to the decision, analysis firm Wood Mackenzie said it saw "only marginally higher" demand growth emerging next year, with Chinese growth behind most of the optimism. A string of good economic data from leading economies spurred some recent rallies in oil prices, though the general trend continues to support a bear market. West Texas Intermediate, the U.S. benchmark price, gained about 70 cents to trade near the $68 per […]

Posted On : Published By : Tom Whipple
Category:

Flow of Opec petrodollars set to dry up

Arab man standing next to gas burning off from oil well The flow of Opec petrodollars into global financial markets is set to dry up as the collapse in the oil price delivers a $316bn hit to the cartel’s revenues. Big oil producers have pumped the windfall they enjoyed from soaring oil prices over the last decade into a huge range of global assets, from US Treasuries and high-grade corporate bonds to equities and real estate. More On this story On this topic IN Commodities Qatar , for example, bought the Harrods department store and Paris Saint-Germain , France’s top football club, while Abu Dhabi’s sovereign wealth fund bought a stake in the glitzy Time Warner building in New York. The flow of petrodollars into the global financial system boosted liquidity, spurred asset prices and helped to keep borrowing costs down. But the 40 per cent fall in Brent […]

Posted On : Published By : Tom Whipple
Category:

Lower Oil Prices Will Help Boost Global Economy, IMF’s Lagarde Says

Managing director of the International Monetary Fund Christine Lagarde speaks with Gerard Baker at The… ENLARGE Managing director of the International Monetary Fund Christine Lagarde speaks with Gerard Baker at The Wall Street Journal CEO Council Monday. Ralph Alswang for The Wall Street Journal WASHINGTON—International Monetary Fund chief Christine Lagarde on Monday said falling oil prices will help boost economies in the U.S. and across much of the globe, a net positive for a world struggling with slowing growth. “It is good news for the global economy,” Ms. Lagarde said at The Wall Street Journal CEO Council annual meeting. Oil prices tumbled to multiyear lows last week after the Organization of the Petroleum Exporting Countries decided to maintain its production quotas, rather than lowering its output target. Lower oil prices are good for most consumers, who pay less for gasoline, but could squeeze energy companies and the economies of […]

Posted On : Published By : Tom Whipple
Category:

Fed’s Dudley Says Oil Price Decline Will Strengthen U.S. Economic Recovery

The sharp drop in oil prices will support U.S. growth by boosting spending, two top Federal Reserve officials said, playing down the risk that plunging energy costs could push inflation further below the Fed’s goal. Fed Vice Chairman Stanley Fischer and New York Fed President William C. Dudley, speaking at separate events today in New York, both stressed the positive impact on the U.S. economy from the steepest decline in oil prices for five years. “I’m not very worried,” Fischer told an audience at the Council on Foreign Relations . “The lower inflation that we’ll get from the lower price of oil is going to be temporary.” Oil prices have slumped after OPEC’s failure last week to curb production, although the market rebounded today. The Fed’s preferred gauge of price pressures facing U.S. consumers rose 1.4 percent in October from the same period a year ago and has not […]

Posted On : Published By : Tom Whipple
Category:

Oil and currency markets reflect expectations for lower global economic growth

Source: U.S. Energy Information Administration, based on Bloomberg Note: The U.S. dollar index measures the value of the U.S. dollar against a basket of six currencies’ exchange rates: the euro, Japanese yen, British pound, Canadian dollar, Swiss franc, and Swedish krona. An increase in the index means the dollar is appreciating against these currencies. March 1973=100. Front month = the near-month contract for Brent crude oil energy futures prices. Since August, both crude oil and currency markets have been influenced by lower economic growth expectations in countries outside the United States . Prices in both markets recently broke out of established trading ranges, driven by concerns about weaker future global demand. The current situation, with the dollar index and oil prices moving in opposite directions, presents a sharp contrast to one in which crude oil supply disruptions or geopolitical risks would cause both the dollar index and crude prices […]

Posted On : Published By : Tom Whipple