Pipeline of future oil projects too high to re-balance market
The oil price has traded in a steady range of around $50/barrel for over five months; however, pressures to the downside are building once again. Announcements from Libya and Nigeria signal that additional supply is coming to the market, outstripping demand. The International Energy Association (IEA) has warned that the pipeline of oil projects is still too high to aggressively re-balance the market meaning that in the medium term the risks are likely to the downside for the oil price. This will continue to be good news for consumers and economies which are net importers of oil. OPEC are once again meeting to discuss the possibility of a production cap this month. However, previous meetings have not resulted in an agreement and with the oil price currently at a level which will be considered as sustainable for many, it is unlikely that any settlement will be agreed.
The Bank of England monetary policy committee met last week. While there was no change in the interest rate or the level of quantitative easing, the committee signalled that there was a possibility that rates could be cut again this year, to close to but above 0%. Another cut will be dependent on new data coming through, however, if new data is in line with the current post-Brexit information the committee have signalled that a cut is likely. This slightly surprised markets, causing the sterling to weaken and gilt yields, which had been rising, to pause for breath.
The US presidential elections are closing in, with the vote due to take place on 8th November. While Hilary Clinton is still leading in the polls both at a national and state level, the lead has been narrowing since the beginning of August. With such an unpredictable electorate and candidate, there is a real possibility of a shock result. While the true implications of a Trump presidency are debatable, the negative impact on investor sentiment would be sharp in the short term.
|UK 10 Year Gilt Yield||0.727||0.867||0.14||19.26%|
(2 weeks: 05/09/2016 – 16/09/2016)
The Federal Reserve interest rate announcement will be made on Thursday evening.