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Global business survey heralds inflection in economic activity

Markit’s world manufacturing purchasing managers index (PMI) dropped from 53.5 in April to 53.1 in May. All in all, the world PMI declined in four of the first five months of 2018. No region has been spared the decline in business sentiment. Nonetheless, the index is still well above the 50 threshold that separates expansion […]

Oil price forecast revised up

The decision by Donald Trump to withdraw from the nuclear agreement with Iran in early May constitutes a major geopolitical shift. Iran is the world’s seventh-largest oil producer, exporting 1.1 million barrels per day (mbd). At this stage, it is unclear how Iranian exports will be affected, but taken together with the crisis in Venezuelan […]

Where next for oil prices?

Oil prices have surged to their highest levels since 2014 (USD69.56 for West Texas Intermediate (WTI) on 19 April and USD75.27 for Brent on 24 April ). They are now USD6 to USD9 above our calculation of their long-term fundamental price equilibrium. Three factors explain the current price premium: Geopolitics: Between Saudi Arabia’s Prince Mohammed […]

Limited upside potential for oil

Strong global growth, a substantial US fiscal stimulus, signs that reflation is taking hold in the US and a relatively weak US dollar should all present a favourable environment for commodities, and for oil in particular, for the rest of this year. However, our analysis suggests that oil is now close to its long-term equilibrium […]

Oil market tilted towards oversupply

  After the 30 November agreement between OPEC and Russia to extend oil production cuts until the end of 2018, it is worth looking again at the balance between oil supply and demand. The most recent data indicate that without continued willingness from OPEC to limit supply, the market will be naturally tilted towards oversupply […]

Upward potential for oil prices is limited

Recent developments have brought noticeable changes to the outlook for the supply-demand balance. First of all, the steady decline in the value of the US dollar since the end of 2016 has been stopped. In fact, the dollar appreciated by 4% between end-September and 7 November. Second, world economic activity has gained steam. In its […]

Fed funds rate back to 3%?

Janet Yellen refers regularly to the concept of ‘neutral’ interest rate as a reference point for monetary policy. The neutral rate is very helpful in determining whether the Fed’s monetary stance is relaxed or restrictive and can also provide insight into the Fed’s next possible moves. The financial crisis has had a considerable impact on […]

Oil prices: limited upside potential

The market was highly optimistic about the oil price at the beginning of this year, with oil analysts expecting that prices would have recovered to USD60-65 by now. These hopes have clearly been dashed, as WTI prices have fluctuated in a range of USD45-55 since January 1. We have been much less optimistic than the […]

The potential impact of a Trump fiscal stimulus

Our core scenario for the US is for real GDP growth of 2% in 2017 and 2.3% in 2018. This assumes that fiscal policy will be only modestly stimulative. However, with the election of Donald Trump as US president, the possibility of a radical change in public policy has increased markedly—possibilities, which enter into our […]

Global sentiment indicator supports growth scenario

Global sentiment improved slightly in November, to 52.1 from 52.0 in October, according to Markit’s global Purchasing Manager Index (PMI). This is the third monthly improvement in a row. One has to look back to August 2014 to find a higher level. Advanced economies are among the more upbeat. Business sentiment in November was highest […]

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