Daily Agenda: Oil Hits New Lows

U.S. oil futures reach lowest price since 2009; GE sells Japan finance unit; El Nino sends warm weather across U.S.


Oil futures markets staged a modest rally today after reaching the lowest levels since 2009 in the prior session. Yesterday, front-month contracts for West Texas Intermediate crude slipped as low as $34.53 per barrel in trading in New York with the spread between U.S. and Brent-indexed markets in Europe narrowing sharply to a $2 range. Increasingly, discussions among analysts, traders and pundits have focused on how low oil prices might ultimately fall and whether a bottom would signal a buying opportunity. While a Congressional move to allow U.S. exports to flow freely for the first time in more than four decades may boost prospects for domestic oil somewhat, the increased efficiency of North American producers in the post-shale boom is evident in historically high supply levels despite an increasing number of wells being mothballed in the face of low prices. OPEC’s decision to retain current production levels and the return of Iran as an exporter continues to support a bearish case for fossil fuels in the face of declining demand from China. With expectations for the Federal Open Market Committee to raise rates at tomorrow’s meeting, the prospect of an increasingly strong U.S. dollar has left some oil market investors wagering that things will get worse for the industry before they get better.

GE to exit financial sector in Japan. One Tuesday Fairfield, Connecticut–based General Electric announced that it had entered into an agreement to sell its commercial leasing franchise in Japan to Sumitomo Mitsui Financial Group for roughly $4.8 billion. The move comes as part of an ongoing process of selling off assets as the global conglomerate withdraws from financial services.

Sweden’s central bank vows to act if necessary. The rate announcement by Riksbank policymakers in Stockholm today included no change in rates but a clear message that the bank is prepared to act as pressure mounts from European Central Bank easing measures. Currently the bank’s benchmark repo rate stands at –0.35 percent, a historic low.

Winter weather fails to appear in U.S. Regions throughout North America are recording some of the warmest temperatures on record for December as a pronounced El Nino weather anomaly distorts seasonal patterns. For commodity markets, including natural gas and agricultural products, the implications are significant. According to meteorological research firm Commodity Weather Group, U.S. wheat producers face minimal winterkill conditions in the coming weeks.

European health-care firms to exchange assets. A complex proposed asset swap was announced today in which Paris–based drugmaker Sanofi would trade its livestock and pet-focused animal health franchise with Boehringer Ingelheim in exchange for the German Firms consumer health-care division. Earlier this year, Sanofi management unveiled planes to streamline operations by focusing on fewer product lines.

German confidence improves. Investor sentiment improved in Germany for the second consecutive month in December, according to data from the Zentrum für Europäische Wirtschaftsforschung. The current situation index rose to 55 versus a prior reading of 54.4 while the economic sentiment benchmark soared on expectations of ECB easing.