Brent prices trade below $30/bbl for the first time since 2004

Thursday, January 14, 2016

Front month Brent futures dipped below $30/bbl for the first time since 2004 as expectations that Iranian crude could soon be hitting the market dampened investor sentiment. The global benchmark has lost over 21% so far this year, sliding from $37.70/bbl last week to trade around $30/bbl today. Front month prices dipped briefly below this level yesterday before partially recovering towards $30.30/bbl at the close as the risk off appetite saw Brent prices close lower for the eighth consecutive session. Activity overnight and early this morning has seen some stability above $30.30/bbl with a brief dip towards $29.70/bbl quickly recovered.

The dollar remains well supported above the 50 day moving average as confidence in the US economy continues to build. Yesterday’s release of the Fed Beige Book indicated a healthy economic expansion over the past six weeks as the jobs market continued to go from strength to strength, despite wage growth remaining broadly flat. The dollar index trades around 98.900 against a basket of major currencies this morning and investors will look towards today’s data releases for any hints of inflationary pressures starting to creep back into the market. With crude oil prices facing considerable headwinds at the start of the year we could struggle to see any uptick in price pressure over the coming weeks and months.   

Today is a somewhat busier session for economic activity with the Bank of England interest rate decision expected at midday followed by a string of US economic indicators. Policymakers at the Bank of England are largely expected to keep the interest rate unchanged as a fresh slump in oil prices, sluggish wage growth and upcoming referendum on Britain’s membership in the EU keep them from pulling the trigger.  The UK economic recovery has lost a bit of steam now and with inflation stuck around zero it seems as if these low rates could persist for some time. Investors will be paying close attention to Carney’s comments and with the US indicating its expectations of four additional rate hikes this year the pressure could be starting to mount on members of the MPC. Today’s release of initial weekly jobless claims and import prices in particular will offer investors further indication of when the next rates rise is coming.

Brent slips below $30/bbl

CO1 Comdty Generic 1St CO Fut 2016 01 14 08 16 24

Dollar index holds onto near term support

DXY Curncy DOLLAR INDEX SPOT 2016 01 14 08 44 18

Events for today

0001

UK

Dec

RICS House Price Balance

1200

UK

Jan

BOE Bank Rate

1330

US

Dec

Import Prices

1330

US

w/e

Initial Jobless Claims

1445

US

w/e

Bloomberg Consumer Comfort

1500

US

Nov

Leading Index

FN: 

Feb  Brent Crude (ICE) 

Topics: Crude oil, Brent, BoE, DXY
More from: Kash Kamal