A well-oiled machine
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Weekly digest
Amidst all the Brexit-related headlines and discussions of trade wars, a steep decline in the oil price has gone by relatively unnoticed. Brent crude, the international benchmark, peaked at 86 dollars a barrel in October and since then has fallen back towards $65, in line with its level at the start of the year. This is good news we would argue, boosting disposable incomes for consumers which should support the current cycle, while the extent of the negative impulse from lower oil prices should be relatively limited. Oil prices rose steadily through the first half of the year in response to falling supply from Venezuela and America’s pledge to reintroduce sanctions on Iranian exports after withdrawing from the Iran nuclear deal, and took another leg up from mid-August after reports of dwindling global stockpiles. Record output from the US and Russia, America’s decision to grant a temporary reprieve to importers of oil from Iran, and the impact of dollar strength on global demand for oil, has prompted a subsequent slide in prices starting in October.
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