Energy prices failed to bounce back following their worst period of the year. WTI, Brent and diesel fell -2.2%, -3.2% and -2.5%, respectively, over the last five days.
- According to JPMorgan (N:JPM), production of shale oil in the U.S. will decline from 7 million bpd to 3.5 million bpd by the end of 2016 if the price of oil stays below US$40/barrel. The same analysis found that if oil is at US$60/barrel, production will still drop by 1 million bpd. It should be noted that a decrease in U.S. production is necessary to reduce the world’s overabundant supply of crude. This is because OPEC has reconfirmed that it intends to maintain its shares of the global market.
- On Friday, the U.S. Senate passed a new budget with a measure that repeals the ban on exports of U.S. crude oil. Once the budget is signed by President Obama, it will be the first time in 40 years that U.S. oil companies will be able to sell their product in international markets. Even if this news is an important development for the energy sector, the current low prices for oil will not encourage much exporting in the short term. Lifting the export ban will not have much impact on markets over the next few weeks, and its effects will not be seen until oil prices rise.
- The U.S. Federal Reserve raised its rates by 25pbs by increasing the range for its federal funds rate to between 0.25% and 0.50%. This is the first time the U.S. central bank has raised its rate in close to 10 years. An increase in rates in the U.S. suggests that the greenback will appreciate against other major currencies and, furthermore, that the cost of goods will rise in Canada. Happy holidays! Our next edition will be released at the beginning of January 2016.
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