Crude Oil Continues to Rise as OPEC Compliance Hits 90%

European stock market advances fade FTSE 100 outperforms and the Euro Stoxx is lower.The FTSE 100 is outperforming again as Sterling’s post-data gains started to flag. The DAX is holding on to a modest gain and the index is holding above the resistance level of 11640 after yesterday’s Trump induced rally, but elsewhere in the Eurozone, the stock market rebound is faltering and Italian and Spanish markets in particular are firmly in negative territory. Mersch’s hint that the ECB may drop the reference to the possibility of lower rates is adding to tapering concerns, even as Mersch confirmed the QE schedule stands. Eurozone breakup fears and weak French production data added to negative Eurozone sentiment.

WTI futures are up for a third day, nearly session highs and up more than  1.1%, extending the rebound from Wednesday’s three-week low at $51.22. Underpinning today is an IEA report finding that the OPEC-led production cut agreement among major oil producing nations reached 90% compliance in January, the first of the six-month plan to lift crude prices. In the bigger-picture view there is little evidence as yet to suggest that the broadly sideways chop around $53.0, which has been seen since early January, doesn’t remain in play.

OPEC-led output trimming is being offset by unexpectedly large increase in crude stockpile data and rising shale production in the U.S. The reduction in cuts has not yet reduced imports into the U.S. but, that should be coming in a few weeks. There has also been signs of softer China demand for crude.

UK Industrial Production Surges in December

UK industrial production data beat expectations in December. Industrial output increased 1.1% month over month and by 4.3% year over year. The median forecasts had been for a 0.2% month over month contraction and 3.2% year over year growth. The narrower manufacturing production figure surged to a growth rate of 2.1% month over month and 4.0% year over year, accelerating from the respective month-prior figures of 1.4% month over month and 1.7% year over year, which were also revised up and were also well up on the median forecasts.

ECB’s Mersch hints at more hawkish tone at ECB ahead. The ECB’s executive board member said the ECB has to keep its word that QE will last through the year for the recover to last, which rebuffs the resurgence of tapering speculation amid criticism of the weak EUR. Mersch also added that inflation will remain subdued, which clearly glosses over the rise in headline rates close to 2% in Germany and above that in Spain and even the pickup in the overall Eurozone number in January. However, Mersch stressed that the current measures are not intended to become a permanent feature and that the recovery can’t be sustained by monetary policy alone.