We are lowering our 2016 and 2017 crude oil projections
We first highlighted the risk of a decline in global oil prices after the peak of the US
driving season back in April (see Oil rebalancing on the edge). Since then, growth
concerns around China coupled with the expectation of increased Iranian output in 2016
have temporarily driven oil prices even lower that we anticipated. Also, a strong USD has
been a drag on oil in the last 12 months, as global nominal GDP in USD is contracting. As
the Fed moves to hike rates, dollar strength seems poised to persist particularly against
the CNY, capping USD oil prices. With our projected balances looking softer and costs
coming down, we pull down our 2016 and 2017 forecasts for Brent to $55 and $61/bbl.
We are lowering our 2016 and 2017 crude oil projectionsWe first highlighted the risk of a decline in global oil prices after the peak of the USdriving season back in April (see Oil rebalancing on the edge). Since then, growthconcerns around China coupled with the expectation of increased Iranian output in 2016have temporarily driven oil prices even lower that we anticipated. Also, a strong USD hasbeen a drag on oil in the last 12 months, as global nominal GDP in USD is contracting. Asthe Fed moves to hike rates, dollar strength seems poised to persist particularly againstthe CNY, capping USD oil prices. With our projected balances looking softer and costscoming down, we pull down our 2016 and 2017 forecasts for Brent to $55 and $61/bbl.
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