Is this the end of the oil industry?

Miranda Wadham
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Is this the end of the oil industry?
Oil is one of the main drivers of the global economy, but prices went into freefall at the start of this year with rates reaching as little as $28 a barrel in January. While it has recovered somewhat since then, the heady days of prices reaching $100 a barrel are little more than a distant memory. The new reality is a two-year slump that shows no signs of ending anytime soon: with hopes of a production freeze fading, the reality of oversupply continues to bog down the market. Simply speaking, the reasons behind the price decrease in oil are excessive supply coupled with decreased demand. China’s economic slowdown is affecting a lot of commodities at the same time as Saudi Arabia, in an effort to maintain its large market share as a crude oil producer, is refusing to reduce productions. And across the Atlantic we have increasing shale production by the US leading it to becoming a self-sufficient energy nation. It’s now becoming increasingly difficult for oil companies in the North Sea, like BP, Shell and Total, to operate with these low prices and we’ve already seen a number of projects stalled. Oil’s lowered price is already hitting construction companies in two directions. On one hand half of all firms are reporting a decline in fuel costs but the flip side is the possible cancellation of major projects, particularly in oil producing countries in the Middle East. As nations come under increasing budgetary pressures, construction projects are under threat. Abu Dhabi, for example, have stalled or cancelled US$200 billion worth of projects. The positive side of the oil slump is that many producer countries are looking seriously at the prospect of renewable energy to guarantee future consumption and export growth in an environment growing increasingly hostile to fossil fuels. Following the historic climate deal in Paris, in which nearly 200 countries participated, Russia, Saudi Arabia, Kuwait and other major oil producers have announced plans to overhaul their energy strategy in order to diversify away from fossil fuels. For these and other oil exporting countries, crude oil and liquefied gas are no longer seen as reliable in generating the state revenues needed to foster economic growth and development. In many ways, the world is already preparing for the end of the oil industry, though the final blow to crude prices – the largescale use of electric cars – is still a few years away. As major automakers ramp up production of affordable electric and hybrid cars, many analysts believe that oil demand could drop further still. In the wake of such projections, the importance of focusing on green building methods has never been greater. Assuming lower prices for the two benchmark crude oils, Brent (Europe, North Sea) and WTI (West Texas Intermediate), for a sustained period, the effect on the construction industry would be noticeable. Those companies that will be stand out as able to succeed in this brave new world will be those who have embraced new, green technologies and who continue to promote and push for further innovations. 
Nikolas Xenofontos, Director of Risk Management at easyMarkets on 06/09/2016
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Morning Round-Up: Retail spending falls, Redrow shares up, Payday loan complaints triple

Miranda Wadham
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Morning Round-Up: Retail spending falls, Redrow shares up, Payday loan complaints triple
Retail spending falls in August after strong July Spending fell back in August after a surprise hike in July, according to the British Retail Consortium on Tuesday. Hot weather kept customers off the high street last month, causing spending to fall 0.3 percent on August 2015. This is a sharp fall from July’s 1.9 percent spike. The figure was the weakest in two years, but the BRC were quick to highlight that it was unlikely to be linked to Brexit. Redrow shares up on strong profits Welsh housebuilder Redrow reported strong figures on Tuesday, with pre-tax profits up 23 percent to £250 million. Sales were “very encouraging” over 2016, despite a warning from Chairman Steve Morgan last year that more expensive regulations might make housebuilding harder. Shares in Redrow are up 7.47 percent at 413.00 (1005GMT). Payday loan complaints triple Complaints over payday loan companies have risen sharply in 2016, more than tripling compared with the last six months of 2015. A total of 4,186 complaints were made about pay day loan companies in the first six months of the year, with 53% of these being upheld by the Financial Ombudsmen. However these issues continue to be dwarfed by PPI complaints, which accounted for 54% of claims considered by the ombudsman. 169,132 new cases in total reached the ombudsman in the first half of the year. 
06/09/2016

Russia – Saudi Arabia oil market deal, Oil futures back below $48

Katy Fleiner
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Russia – Saudi Arabia oil market deal, Oil futures back below $48
After an initial jump in oil futures, fuelled by the Russian – Saudi Arabian announcement of cooperation on strategies to stabilise the oil market, Brent Crude has again retracted below $48 per barrel.
Russia and Saudi Arabia agree on collaborating on strategies to stabilise the oil market
Russian Energy Minister, Alexander Novak, and Saudi Energy Minister, Khalid al-Falih, made the announcement at a G20 news conference in Hangzhou, China. In the statement, the two state representatives voiced their countries’ recognition of the necessity to contain excessive volatility in the oil market and announced, that the two top oil producers will be leading the formation of a working group which will monitor the oil market and make recommendations targeting the stabilisation of the oil price. The countries hope that other OPEC countries will join the initiative to coordinate a response to the commodities slump, which started more than two years ago.
A “historic moment” for OPEC and non-OPEC oil producer relations
Novak said, that the announcement of the countries collaboration presents a “historic moment” in relations between both OPEC and non-OPEC oil producing countries. He also suggested that a production freeze would present a way to stabilize oil prices. However, attempts at oil production freezes have failed in the past. In many instances freeze initiatives failed because Saudi Arabia was unwilling to commit to the measure, and Saudi Minister Falih said in an interview with Saudi-owned Al Arabiya TV, that “Freezing [production levels] is one of the preferred possibilities but it’s not necessary today.” Although this divergence in opinion from the two sides represents a challenge, Novak specified to reporters, that Russia would be willing to accept any month of the second half of this year to choose as a Benchmark for a production freeze, further encouraging Saudi Arabia and other OPEC countries to engage with the idea. CNBC stated that “this time around, Iraq and Iran’s cooperation will be key if a broader deal on oil production levels is sought.” OPEC will be holding informal talks in Algeria in September and an official meeting in Vienna in November. Both assemblies will be accompanied by a meeting between the Russian and Saudi Arabian Energy Ministers. The first official meeting of the new working group will be held in October.
Oil futures rise initially but retract slightly on gains in the afternoon
On the news, Brent Crude (CO1:COM) increased 5.6%, to $49.31bbl. by 10.25am. It has since retracted to stand at $47.49bbl. at 5.17pm, up 1.41% from market open. 
Monday, 05/09/2016

EMU services sector expansion slows in August

Katy Fleiner
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EMU services sector expansion slows in August
The Euro-Zone Markit Services PMI for August, published by Markit Economics Monday morning, has suggested that expansion in the services sector has slowed last month. While France, Italy and Spain figures beat estimates, Germany’s services sector growth came in far below expectations.
Euro-Zone services sector perform below expectations
The collective Euro-Zone Markit Services PMI for August came in at 52.8, down 0.3 points from both July’s measure and analysts’ estimates. Lower growth performance in the services sector added to a lower-than expected Markit Manufacturing PMI, published last week. This moved the PMI Composite to 52.9, down 0.4 points from July.
France, Italy and Spain on the other hand performed above expectations.
The Spanish Markit Services PMI stood at 56 in August. This measure is 1.9 points higher than it was in July and beat estimates by 0.9 points. Italy’s Services PMI rose from 52 in July to 52.3 in August and beat the consensus prediction by 0.4 points. France’s Services PMI also increased from 52 to 52.3, an increase 0.3 points above estimates.
However, German services figures performed particularly poorly.
The PMI Services came in at 51.7, down 1.6 points from the previous month and the lowest value the indicator has taken since December 2014. The PMI Composite stood at 53.3, losing 1.1 points from July and falling to its lowest measure in 18 months.
EUR falls against GBP
Amid the disappointing EMU data release and a higher-than-expected UK Services PMI, the Euro fell sharply against the Pound this morning. Between 8.50am and 9.50am the EUR/GBP dropped over 5.6%, to a low of 0.83534. It has since recovered near to half of its initial losses and was trading at 0.83749 at 12.15pm.
ECB monetary policy meeting scheduled this Thursday
Lately, a cohort of data has suggested that Euro-Zone economic activity has contracted since the UK’s decision to leave the European Union. The European Central Bank is set to meet this Thursday and the governing council will communicate its interpretation of the latest publications of economic data, as well as its monetary policy decision, Thursday afternoon. 
Katharina Fleiner 05/09/2016

Comptoir Libanais shares rise on new store openings

Miranda Wadham
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Comptoir Libanais shares rise on new store openings
Shares in Lebanese chain Comptoir Libanais rose over 10 percent this morning after it announced the opening of six new restaurants. The group will open three more restaurants in London, in Soho, Kensington and its first in-store restaurant in John Lewis Oxford Street. It also plans to open sites in Exeter, Bath and Leeds later this year. Chaker Hanna, CEO of the Comptoir Libanais said: “”We are delighted to be rolling out six new sites with even more planned for next year. We’ve seen a real increase in demand for the fresh, nutritious and affordable food we offer so are excited to showcase the best of Lebanese cuisine to new local communities, businesses and families. We look forward to opening our doors to lots of mezze-lovers!” Shares in Comptoir Group (LON:COM) rose 10.29 percent on the news to 75.00 pence per share. (1130GMT). 
05/09/2016
 

Theresa May tight-lipped on Brexit promises

Miranda Wadham
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Theresa May tight-lipped on Brexit promises
Theresa May has refused to commit to an Australian points-based system of immigration, shedding some light on how the UK may look post-Brexit. May questioned a system whereby migrants were admitted by skill and spoke of potentially retaining preferential treatment for EU citizens. Warning there was “no single silver bullet” on reducing immigration, she declined to comment further on the type of strategy she would be pursuing. She also refused to commit to other promises made by the Leave campaign, including the £100 million a week going towards the NHS. Remaining tight-lipped on any concrete plans, she said only: “I’m going to work for what I just said I’m going to work for: the best possible deal for the UK in terms of the relationship that we would have with the EU, following us leaving.” She gave her comments just before setting off to China for the G20 summit, where she will meet with other heads of state – some of whom have issued stark warnings over their relationships with Britain post-Brexit. This morning Tokyo threatened to move its companies to other European countries if the privileges of EU membership are not retained. Yesterday the Japanese government specified a 15-page list of demands designed to protect its car manufacturers based in the UK. 
Miranda Wadham on 05/09/2016

Morning Round-Up: UK services rebound, Morrisons increase price war, car registrations up

Miranda Wadham
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Morning Round-Up: UK services rebound, Morrisons increase price war, car registrations up
UK services rebound in August The UK service sector saw its largest month-on-month rise on record last month, according to the Markit/CIPS purchasing managers index. The figure jumped from 47.4 in July to 52.9 in August, pushing it back into expansion. The adds to the plethora of economic data released recently suggesting the fallout from Brexit may not be as bad as expected. Morrisons slashes prices yet again Struggling supermarket Morrisons has slashed prices again, as it attempts to compete with discounters Lidl and Aldi. Prices on meat and poultry will be cut by an average of 12 percent, alongside price cuts to its range of fruit and vegetables. Britain’s Big Four supermarkets have already been forced to cut prices to incentivise customers into store and away from budget challenger supermarkets. Marketing director Andy Atkinson commented: “We’re a British company, making our own ham and buying our own cattle here in Britain. By doing this efficiently ourselves we can pass much-needed savings on to customers.” Car sales jump in August Car sales saw a 3.3 percent increase in August compared to a year earlier, according to the Society of Motor Manufacturers and Traders. 81,640 vehicles were registered last month, up 2.8 percent in the first eight months of the year. 
05/09/2016

Will BP have to cut its dividend?

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Will BP have to cut its dividend?

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European Stock Markets up on slow US jobs growth

Katy Fleiner
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0
European Stock Markets up on slow US jobs growth
The market opened on a high this morning in anticipation of the afternoon release of US Nonfarm payrolls. The data was published at 1.30pm and missed expectations.
In the aftermath, European markets enjoyed another boost. The FTSE100 was up 112.08 points (+1.66%) by 2.53pm, while the German DAX gained 105.25 points (+1%) by 2.52pm. France’s CAC 40 was the biggest gainer of the major European indices, up 74.83 points (+1.69%) US markets also opened higher amid slow job growth in August. The Dow Jones is up 99.65 points (0.54%) and the NASDAQ gained 28.13 (+54%). The upswing was led by high-dividend utility stocks, benefiting from low interest rates. Energy companies also recorded gains as the price for crude oil overturned a one-week slump. 
Katharina Fleiner 02/09/2016

Disappointing US Employment figures send Dollar tumbling

Katy Fleiner
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1
Disappointing US Employment figures send Dollar tumbling
Disappointing data on the development of US employment in August saw the dollar fall drastically against other major currencies.
This afternoon, the US Department of Labour released that unemployment remained at the previous level and new job creation had fallen from 255,000 in July to 151,000 in August. In the aftermath, the USD fell nearly 0.4% against the EUR, to a week low at 0.89030. After the initial fall the USD/EUR recovered to stand at 0.89227 at 2.20pm. The USD/JPY fell by nearly half a percent after the data release but since recovered all losses to stand at 103.58967 at 2.20pm. No such recovery can be seen in the USD/GBP. The rate dropped 5.2% to a low of 0.74903 and has since only gained marginally to trade at 0.75009 at 2.30. The USD already had to record major losses yesterday, after the ISM Manufacturing indices came in below expectations. 
Katharina Fleiner 02/09/2016
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