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Oil Monthly Fundamental Forecast – December 2015

By:
Barry Norman

Outlook and Recommendation Crude Oil closed the month at 41.77 while Brent Oil was at 44.73. Crude oil was down over 4% for the month as global supplies

Oil Monthly Fundamental Forecast – December 2015

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Outlook and Recommendation

Crude Oil closed the month at 41.77 while Brent Oil was at 44.73. Crude oil was down over 4% for the month as global supplies surged and the greenback rallied. The OPEC meeting will be the main focus moving into December. The OPEC’s December meeting might cause more stir than usual, as the period of low oil prices enters its 18th month with no visible signs of changes in sight, and growing dissatisfaction with Riyadh’s leadership.

The price war between the Cartel and non-OPEC producers was partially caused by the Saudi refusal to cut production in November 2014.

The initial idea behind it was to bankrupt the US shale industry with low oil prices. In theory, this would solve the oil glut; push the oil prices, while allowing the Kingdom to preserve its market portion.

In practice, things did not work out so well, and the bill that OPEC might have to pay could be higher than initially expected. The oil glut problem has actually become more acute in the past 12 months, and although the US production has slowly started to decrease, the shale sector has shown a remarkable resilience so far.

In addition, Iran is eager to alleviate the impact of long-standing international isolation and current low prices with a production increase of 1 million b/d in the next six months.

Unlike the United States and other developed countries, where the blessings of cheap energy offset the negative impacts of low prices on oil industry, the OPEC countries with their high dependency on oil exports have been hit hard.

Saudi Arabia, which collects 88% of its state revenues from oil exports, is facing a fiscal deficit of at least $145 billion in 2015, which makes more than 20% of its GDP. In comparison, the 2014 deficit was $17.5 billion. Despite heavy losses, the Kingdom is still in a good position with its hard currency cushion, but according to the IMF, the country might run out of money in five years if it continues to lavishly subsidize public services in the current low oil price environment.

Other Cartel members, such as Venezuela and Nigeria are in more dire straits and they, along with Iran, are the most likely dissidents against the current course. Venezuela is a staunch advocate of a negotiated equilibrium with non-OPEC producers that might push prices to more bearable levels of $70 per barrel. The Chavinsta regime of Nicholas Maduro desperately needs a strong financial boost to preserve its legitimacy amid economic collapse and the inevitable defeat at the December parliamentary elections.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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Major Economic Events That Will Affect The Markets In December

 

Cur.

   

Event

 

 

 

 

 

Tuesday, December 1, 2015

 

  CNY

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  CNY

 

Caixin Manufacturing PMI (Nov)

 

 

 

 

 

 

  AUD

 

Interest Rate Decision (Dec)

 

 

 

 

 

 

  AUD

 

RBA Rate Statement  

 

 

 

 

 

 

  EUR

 

German Manufacturing PMI

 

 

 

 

 

 

  EUR

 

German Unemployment Change

 

 

 

 

 

 

  GBP

 

BoE Gov. Carney Speaks  

 

 

 

 

 

 

  GBP

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  USD

 

ISM Manufacturing PMI (Nov)

 

 

 

 

 

Wednesday, December 2, 2015

 

  AUD

 

GDP (QoQ) (Q3)

 

 

 

 

 

 

  GBP

 

Construction PMI (Nov)

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)  

 

 

 

 

 

 

  USD

 

ADP Nonfarm

 

 

 

 

 

 

  USD

 

Fed Chair Yellen Speaks  

 

 

 

 

 

Thursday, December 3, 2015

 

  GBP

 

Services PMI (Nov)

 

 

 

 

 

 

  EUR

 

Interest Rate Decision

 

 

 

 

 

 

  EUR

 

ECB Press Conference  

 

 

 

 

 

 

  USD

 

Yellen Testifies  

 

 

 

 

 

Friday, December 4, 2015

 

  AUD

 

Retail Sales (MoM) (Oct)

 

 

 

 

 

 

  USD

 

Nonfarm Payrolls (Nov)

 

 

 

 

 

 

  USD

 

Unemployment Rate

 

 

 

 

 

 

  EUR

 

ECB President Draghi 

 

 

 

 

 

Tuesday, December 8, 2015

 

  CNY

 

Trade Balance (Nov)

 

 

 

 

 

 

  GBP

 

Manufacturing Product

 

 

 

 

 

Wednesday, December 9, 2015

 

  CNY

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  NZD

 

Interest Rate Decision

 

 

 

 

 

Thursday, December 10, 2015

 

  AUD

 

Employment Change

 

 

 

 

 

 

  GBP

 

Interest Rate Decision

 

 

 

 

 

Friday, December 11, 2015

 

  USD

 

Core Retail Sales (MoM)

 

 

 

 

 

 

  USD

 

PPI (MoM) (Nov)

 

 

 

 

 

 

  USD

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Saturday, December 12, 2015

 

  CNY

 

Industrial Production

 

 

 

 

 

Sunday, December 13, 2015

 

  JPY

 

Tankan Large

 

 

 

 

 

 

  JPY

 

Tankan Large Non-

 

 

 

 

 

Tuesday, December 15, 2015

 

  GBP

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  EUR

 

German ZEW Economic

 

 

 

 

 

Wednesday, December 16, 2015

 

  EUR

 

German Manufacturing

 

 

 

 

 

 

  GBP

 

Claimant Count Change

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  USD

 

Fed Interest Rate

 

 

 

 

 

 

  NZD

 

GDP (QoQ) (Q3)

 

 

 

 

 

Thursday, December 17, 2015

 

  EUR

 

German Ifo Business

 

 

 

 

 

 

  GBP

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Thursday, December 24, 2015

All Day

 

Holiday

Germany – Christmas Eve

 

 

Holiday

United States – Christmas Eve – Early close at 13:30

                     

 

 

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