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After gloomy Goldman report, oil dips below $45

Jan. 13: Oil drops below $45, plus trade growth drops for China, and the psychology of your wallet


 

MORNING-PLAYBOOK-STORY
This morning, we’re back to oil, oil, oil—as West Texas Intermediate is currently below $45. The TSX had a three-digit drop yesterday upon the news, as well as a forecast revision by Goldman Sachs, just one of a spate of analysts to revise their predictions for 2015, not a bad idea, since oil was $20 higher as recently as the end of November. The loonie took a dip on the news to 83.56.

This is worrying Canadian energy companies, the Bank of Canada confirmed yesterday in its business outlook survey. The report, an anecdotal compilation based on interviews with major firms, says companies linked to exports to the U.S. are feeling buoyed by some good economic news from the south. You can read the report here. Tomorrow will see the release of the American equivalent, the Federal Treasury’s beige book.

The U.K.’s inflation numbers also came out this morning, hitting a record-breaking low of 0.5 per cent, amid deflation in the eurozone and concern over stagnating wages in the U.S.

Let’s talk more about oil. West Texas Intermediate has dropped so far this morning, to $44.58, while Brent was at $45.79. Even news this morning that China had imported record amounts of crude—more than 13 million tonnes in December—didn’t push up the price. A report by Goldman Sachs yesterday has spread a little gloom over markets, after they downgraded their prediction for 2015 for WTI to around $47, and said prices could “potentially dip into the high $30s.” The drop has particularly affected Alberta, with perhaps no one more affected than Fort McMurray, where Josh Wingrove at the Globe profiled sliding retail in the oil-patch city. 

TXS dropped on the news—down 119.19 points, with commodities leading the way—to a 12-year-old low. All the New York exchanges also fell yesterday, brought down by the same energy prices (and, interestingly, the company behind Tiffany’s jewellery). Asian indexes followed suit earlier today, alongside data that Chinese growth has slowed. In Europe, the picture is more mixed: Indexes are looking fairly steady, based on a mix of low-inflation or deflation numbers, which suggest central banks will leave interest rates lower for longer, especially in the U.K., and fuelling never-ending speculation over whether the European Central Bank will start qualitative easing to stimulate the eurozone.

Busy year in the St. Lawrence Seaway. The busy shipping route reached a “post-recession” high for volume last year—and saw a record number of major cargo ships—apparently fuelled by a big crop the year previous and demand for steel for manufacturing. For the first time, the seaway was also importing road salt, a hot commodity when the weather is bad. And this all happened despite a shortened season, after a biting winter made some areas impassable.

Chinese trade lower than expected.  Chinese trade numbers released this morning revealed trade grew 3.4 per cent from the previous year, below expectations set by the government, which are 7.5 per cent. Granted, China hasn’t hit this target in three years, but it’s yet another sign that outside demand can’t prod major growth as domestic demand slows. And general growth numbers are also far below government hopes, hitting below 7.5 per cent for the first time since the late 1990s, and missing government forecasts for the first time since 1989, the FT says.

How much cash do you carry?
If you go around carrying $100 bills, you’re a pickpocketer’s dream—or so Businessweek says. Despite the ability to use credit or debit almost anywhere, Americans haven’t levelled off on the cash-carrying, though four out of five are carrying the smaller ranges of bills, enough for a few errands. There’s speculation that those $100 hoarders are more likely to be fraudsters, money launderers, or anyone else who needs his or her money to be a bit harder to track—but the probable answer is he or she is just a person with more money overall. 

Need to know:
TSX: 14,265.01 (-119.91 points, 0.83 per cent), Monday
Loonie: 83.56 cents (-0.71 cents), Monday
Oil (WTI): $44.56, Tuesday morning


 
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