UBS | We’ve marked to market for 4Q15 and lowered our 2016 Brent/WTI oil price forecasts ($/Bbl) to $42.50/$40.00 (from $57.50/$52.50), reflecting the much weaker 4Q outturn and lower entry point into 2016. In the near-term the market remains oversupplied and we expect global inventories to continue building until 3Q16, dampening any potential price recovery.
The markets are connected via expectations. If there is a price change in one market, then this information is transmitted to other markets pricing in easily assimilated expectations within a similar time horizon. All consumer durables markets have an eye on the future. In other words, they have a financial component although the product which is trading on the market has an industrial use. For example, the oil and bond markets.
The abrupt fall in crude oil prices, considered a blessing not so long ago, is now seen as increasingly troubling. West Texas and Brent crude prices fell from over $100 a barrel in 2014 to just $30 last Friday, a 12-year low. Although the drop in crude waw initially welcomed, many fear that current low prices may bring with them more problems than solutions.
Following the oil price slump, both wealthy countries will relatively see their privileged economic position trimmed, but they can still capitalize on their status as oil producers, boosting production to defend market share and leading the European M&A market, respectively.
London | UBS | At the risk of making an obvious point, the fall in crude oil prices is not all there is to the impact of oil on consumer price inflation.
Cheaper oil and electricity pushed prices down by 0.3% in August compared to the previous month. In year-on-year terms, prices dropped by 5 basis points or 0.4%.
There has been a severe downward correction in global expectations in August.
LONDON | UBS | Lower oil prices are evaluated as essentially “a wash” for the US economy.
Global oil demand in 2015 is set to grow at the fastest pace in 5 years, underpinned by the economic recovery and low oil prices.
The US economy is gaining momentum in the second quarter with an estimated 2.3% growth, supported by consumption and construction investment.