Afternoon analysis 11.08.2016

Mixed signals on crude after the IEA report. Still relatively few jobless claims from the US. The zloty has pared the morning losses while the pound dropped to new lows against the Polish currency

Another report on oil was published in late morning. In comparison with last month, the IEA demand data for 2017 was revised down by 100k barrels a day, but consumption is still scheduled to increase by 1.2 million barrels to 97.5 million/day.

The supply is expected to be slightly higher (200k/ day) due to new production from Kazakhstan. Overall, the message from the IEA didn’t change much. The market is approaching a balance of the supply and demand.

The IEA also tried to answer a question in its report about what level of oil would lure the shale producers. It is worth it to remember that a significant increase of the production from the States (from 5.5 million in 2011 to 9.5 million in mid 2015) initiated the price slide two years ago and provoked the OPEC to secure its market share and increase supply. Currently, the supply from the US is around 8.5 million a day.

According to the Agency, the oil would have to increase toward 60 USD/barrel to “significantly increase the activity of the sector.” Additionally, it seems that the OPEC countries would not like to see such a price spike, as this might again push the market toward an oversupply and create more slump in the future.

Taking into account the most recent reports from the IEA, EIA or the OPEC - the path toward balanced market should be continued overall. It should significantly reduce the risk of a price slide below the 40 dollar mark. On the other hand, the the attempt to secure market share and decrease the future shale oil activity, the OPEC will not really push for a higher price and it will probably increase the production to keep it below 55 USD.

Regarding oil exporting, a fairly narrow range of the WTI or Brent trading should work as a stabilizer for the valuation of the rouble, Canadian dollar, Norwegian krone or the Mexican peso.

Jobless claims from the US. Stronger zloty

In the afternoon, the new weekly jobless claims were published in the States. The data was close to market consensus at 266k. The continued claims are currently at 2.15 million. Both values are very close to record low levels, which show that the US jobs market is quite healthy.

Around 4 pm, the zloty was stronger than late morning. It is partially due to a fairly good sentiment on the US market just after the stocks opened in New York. The S&P 500 index is only 4-5 points below the record high levels. A positive impact from the zloty also comes from a “risk on” mood on EM currencies. The GBP/PLN pair in the afternoon is lower again and dropped to the lowest level since December 2013 at 4.95.