Asian and European shares are faced with heavy selling pressure on Wednesday and are tracking crude oil’s descent as crude prices dip even further below $30 to 2003 levels following a report yesterday from the International Energy Agency (IEA) that points to weak global demand for crude oil alongside easing growth and persistent oversupply, familiar themes that have served to push crude oil prices down another 20 percent in 2016.
Another catalyst for crude oil’s decline on Wednesday was a 2015 GDP report from China released yesterday that showed the pace of growth in the world’s second largest economy dropped to 6.9 percent, the slowest level of GDP growth since 1990.
Crude oil bulls don’t have much to cheer about in 2016.
Currently, U.S. WTI -Feb. 2016 contract (NYMEX) is down -3.34 percent to $27.51 while Brent Crude (March 2016 contract) is lower by -2.71 percent to $27.96
Currency traders are turning to the Japanese yen, a safe haven for support. The yen is currently trading higher against the U.S. dollar.
U.S. stock futures are heading for a lower opening with the Dow set to tumble over 300 points -2.05 percent.
Yesterday the IEA released a January report that showed global demand for crude dropped to a one-year low in the fourth quarter.
“Persistent oversupply, bloated inventories and a slew of negative economic news pressured prices so that by mid-January crude oil touched 12-year lows. The OMR outlook for 2016 has demand growth moderating to 1.2 mb/d” the IEA wrote in their statement.
The IEA noted that sanction- free Iran will boost output by an immediate 500 kb/d.
The IEA’s assessment is that around 300 kb/d of additional crude could be flowing to world markets by the end of the current quarter.
Later today (10:30 EST) crude inventories will be reported for 1/16.
CPI inflation for December is released as well (8:30 EST). Economists from briefing.com forecast a decline of -0.1 percent with CPI in December.
Housing Starts and Building Permits will be also reported for December (10:30 EST)