WTI FALLS BELOW $30/BARREL

WTI falls below $30/barrel WTI crude oil tumbled yesterday, briefly falling below the USD 30 level, its lowest intraday price since December 2003. The 12-year low price threatens the survival of a number of oil firms, as they may not be able to remain afloat at the current low prices. It also hints more trouble for major crude-producing nations, who in the absence of major energy-sector investments could experience an increase in their unemployment rates. Case in point is oil giant BP, which stated on Tuesday that it would decrease its workforce by 5% in light of the continued tumble in prices and weakening demand. There are no signs that drillers will decrease supply in the foreseeable future, especially with Iranian oil ready to enter the market and drive supply even higher. Additionally, as global demand remains weak by fears of a Chinese slowdown, oil prices as well as oil related currencies like CAD and NOK could remain under selling pressure.

• Chinese trade data stronger than expected China’s total trade activity contracted much less than expected in December. Exports fell 1.4% yoy vs expectations of -8.0% yoy, while imports also fell but not as sharply as expected. The surprising data indicates that exports may be benefiting from the yuan’s depreciation against the dollar, which has continued in the early days of the new year. The improvement in imports may reflect factories stocking up on cheap oil, whose imports rose more than 21% in December, as well as iron ore and other commodities. Overall, the December trade data have offered some signs that the economy may be stabilizing, but at a slow pace. AUD/USD and NZD/USD, which could have otherwise come under renewed selling pressure on the news, had no major reaction.

• Today’s highlights: In Eurozone, industrial production for November is forecast to have fallen, a turnaround from the previous month. Bearing in mind that industrial production in Eurozone’s two largest economies, Germany and France, also fell in November, we see a high likelihood for a soft IP print for the entire bloc as well. A possible fall in the reading could add to concerns that the slowdown in China and other EM markets has started to impact Eurozone’s economy, which could weaken EUR a bit as a result, at least at the release.

• From the US, the Fed will release the Beige Book, which includes a summary and analysis of current economic conditions in each district and sector. This will provide qualitative information to Fed officials on how the US economy has been performing after the first rate hike, ahead of the January 26-27 FOMC meeting.

• We have three speakers scheduled on Wednesday’s agenda: ECB Executive Board member Sabine Lautenschlaeger, Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans speak.