This content is from: Portfolio

Daily Agenda: What It Will Take for Oil to Rebound

Samaras’s coalition fails to win enough support in Greek elections; U.K. GDP numbers disappoint; Walgreens beats forecasts.

With a week and a half left of 2014, oil markets continue to be central to risk narratives. According to consensus forecasts, Energy Information Administration data, scheduled for release today, is expected to show a decrease in U.S. crude inventories from 2.5 million barrels to 377.4 million for the week. A modest reduction in stockpiles is unlikely to make a major impact on prices, however, as U.S. domestic oil production continues to soar. The data release last week registered production levels of 9.14 million barrels the fastest pace since 1983. Outside the U.S., geopolitical factors including violence in Libya that has shut down production in several regions has also failed to bump up prices, as Saudi Arabia’s commitment to keeping production levels on pace offsets any supply-side issues elsewhere. So what can drive oil prices higher again? In an OPEC summit this week, delegates discussed a rebound to $70 to $80 per barrel by the end of next year as an attainable level, provided growth returns to Europe and the pace of demand in China revives. Whether or not this is wishful thinking, the oil markets may be reaching an inflection point.

No clear winner in Greek election. As anticipated by most analysts, Prime Minister Antonis Samaras failed to garner enough support in national elections to form a new government in Greece. Stavros Dimas, Samaras’s chosen successor, must now continue to campaign against antiausterity contenders such as opposition party Syriza in the lead-up to the third round of voting on December 29.

Mixed data out of France and the U.K. Gross domestic product in the U.K. grew at a slower pace than initially estimated, according to data released today by the Office for National Statistics. At 0.7 percent for the quarter compared to the originally reported 0.9 percent, the annual pace of growth in the U.K. dropped to 2.6 percent. Separately, the nation’s current account deficit increased by a margin of £27 billion ($42 billion), exceeding forecasts and reaching 6 percent of GDP. Across the Channel, revised third-quarter GDP data for France confirmed the initially reported 0.3 percent annualized rate, with a modest increase in exports.

U.S. data on deck. Today will be a very busy day for major economic indicators in the U.S., with revised GDP and November personal consumption expenditure figures, November durable goods and new homes sales and final December University of Michigan consumer sentiment data. Consensus forecasts are for a modest downward revision for overall growth, while the pace of consumer spending is expected to have moderated in November.

Walgreens beats forecasts. Walgreens today reported fiscal first-quarter 2015 earnings that beat analyst expectations. Net earnings at the Deerfield, Illinois–headquartered drugstore chain rose to $809 million, or $0.85 per diluted share, versus $0.72 in the same quarter last year. Year-to-date, the company’s stock has risen nearly 30 percent, despite six consecutive prior quarters of performance at or below analyst forecasts.

Related Content