Week in review: Oil prices continued to slide this week, with January dated Brent falling to below 63$/bl on Friday, down over 7% since Monday. Over the last six months, oil prices have almost halved due to weak demand, particularly from Europe and China, while supply has remained relatively high. Despite this decline in prices, the IEA (International Energy Agency) revised down its demand forecast, anticipating that global oil demand will grow by 900,000 barrels a day in 2015 — compared with 1130,000 b/d last month — to 93.3m b/d. OPEC has also revised down demand forecasts for its cartel´s crude, which is now seen standing at 28.92m barrels of oil a day in 2015, a downward revision of around 300,000 b/d from previous estimates. Lower oil prices are tantamount to a positive supply shock, and should benefit most economies, except producing countries. In Europe, however, the ECB fears that lower oil prices may feed into lower inflation expectations, raising real interest rates.
In Europe, industrial production was broadly flat mom in September (up 0.7%yoy), further fuelling fears that activity in Europe is weakening. Greece’s PM has called for snap presidential elections, starting on 17 December, hoping it will give his Government support for reforms in the year ahead. However, it is likely to be a close call and markets fear that the radical party Syriza, that wants Greece to default, may actually win.
In Portugal, GDP per capita in purchasing power parity, rose by 3 p.p. from 76% of the EU average to 79%. Most of this rise can be explained by emmigration, given that GDP fell more in Portugal than in the EU in 2013.
- Tuesday 16 December: Euro area PMIs due to be released. Consensus is for a small rise in the composite indicator to 51.4. The manufacturing indicator is seen rising also from 50.1, the brink of stagnation, to 50.5
- Wednesday 17 December: Federal reserve meeting ends today. No big news expected. Greece’s snap presidential election starts in Parliament. The Government needs 180 votes to get support for its candidate and further reforms.
- Thursday 18 December: German Ifo business climate is seen rising by less than one point to 105.5, on the back of rising expectations.