Oil: Price drop sparks global recession fears – Danske Bank

By FXStreet FXStreet (Delhi) – Research Team at Danske Bank, notes that abnormally warm winter weather in northern America and northern Europe along with tighter monetary policy in the US, the euro area and China have weighed further on global oil demand over the past month.

Key Quotes

“The fact that the global goods trade has not grown the past couple of quarters shows that weak global demand has been the bigger contributor to the decline in the oil price. Global economic growth will likely be relatively modest this year and next year, with some improvement expected to set in towards the end of the year. It means that producers will have to continue to keep prices low to balance the market.

The current low price will not meet the fixed production costs for many producers outside OPEC, which has led them to cut back on new investments, but as long as the crude oil price is above USD10/bl marginal costs should be covered.

Following last summer’s successful implementation of the nuclear deal, sanctions on Iran’s oil exports have been removed and the country is set to attempt to raise production and exports back to the pre-sanction levels from 2011. In our view, …read more

Source:: FX Street