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posted on 01 January 2016

Investing.com Weekly Wrap-Up 01 January 2016

Written by , Investing.com

Global stocks mostly lower on last day of the year, oil in focus

Global stock markets were mostly lower on Thursday, the last day of 2015, as investors continued to track movements in the oil market.

Oil prices ticked modestly higher Thursday, after falling more than 3% in the prior session after data showed a surprise buildup in U.S. oil stockpiles.

West Texas Intermediate oil futures are on track to post an annual decline of 31% in 2015, while Brent oil prices are down nearly 36%, as oversupply concerns dominated market sentiment for most of the year. See more on oil later below.

Holidays limited the damage in Asian markets, with many either closed or shutting early.European shares were lower ahead of a shortened trading session on the last day of 2015. Meanwhile, U.S. markets wrap up the last week of trade for the year on Thursday, and are closed Friday for New Year's Day.

Heading into the final trading session of the year, volumes are expected to remain light, reducing liquidity in the market which could result in exaggerated moves.

Additional stock news from Reuters at Investing.com with more details on U.S. markets.

Forex

The dollar held on to broad gains on Thursday, the last trading day of 2015, despite the release of disappointing U.S. economic data.

Volumes were expected to remain light as many traders already closed books before the end of the year, reducing liquidity in the market.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.27% at 98.57 during U.S. morning hours.

Manufacturing activity in the Chicago-area contracted at the fastest pace since July 2009 in December, dampening optimism over the U.S. economic outlook, industry data showed on Thursday.

Market research group Kingsbury International said its Chicago purchasing managers' index tumbled by 5.8 points to 42.9 this month from a reading of 48.7 in November. Analysts had expected the index to rise 1.1 points to 49.8 in December. On the index, a reading above 50.0 indicates expansion, below indicates contraction.

A separate report showed that the number of people who filed for unemployment assistance in the U.S. rose to the highest level since mid-July last week.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefitsincreased by 20,000 last week to 287,000. Analysts expected jobless claims to rise by 3,000 to 270,000 from the prior week's 267,000.

The data failed to offer clues as to how fast the Federal Reserve will raise interest rates next year.

With the first U.S. rate hike since 2006 out of the way, the focus is now on the pace of future rate increases. The Fed, from its forecasts, is anticipating four rate hikes next year.

CTFC Commitment of Traders

Speculators this week were were slightly more bullish on the dollar. Gold and silver sentiment became more bullish, while bullishness decreased slightly for oil.

cot.2015.dec.16

Gold

Gold prices struggled for direction in quiet trade on Thursday, as volumes were thin ahead of the New Year holiday.

The precious metal is on track to post an annual decline of approximately 11% in 2015, the third yearly loss in a row, as speculation over the timing of a Federal Reserve rate hike dominated sentiment for most of the year.

With the first U.S. rate hike since 2006 out of the way, investors are now focusing on the pace of future rate increases. The Fed, from its forecasts, is anticipating four rate hikes next year.

Rising interest rates historically have been bad news for gold, which can't compete with the higher interest rates offered by other assets.

In recent trade, gold for February delivery on the Comex division of the New York Mercantile Exchange inched up $1.00, or 0.09%, to trade at $1,060.80 a troy ounce during U.S. morning hours.

A day earlier, gold fell $8.20, or 0.77%, to end at a two-week low. Prices plunged to a more than five-year low of $1,046.80 on December 3.

Meanwhile, silver futures for March delivery tacked on 0.3 cents, or 0.02%, to trade at $13.84 a troy ounce. Silver is on track to post an annual decline of nearly 11% in 2015.

Elsewhere in metals trading, copper shed 2.2 cents, or 1.03%, to $2.124 a pound. The red metal is on track to post an annual decline of almost 25% in 2015 as concerns over the health of China's slowing economy dominated sentiment for most of the year.

The Asian nation is the world's largest copper consumer, accounting for nearly 45% of world consumption.

Oil

Oil prices steadied on Thursday but were still headed for a second year of steep declines after a race to pump by Middle East crude producers and U.S. shale oil drillers created an unprecedented global glut that may take through 2016 to clear.

Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures were on track finish 2015 down more than 30 percent after another year that showed the helplessness of Saudi Arabia and others in the once-powerful Organization of the Petroleum Exporting Countries (OPEC) to support oil prices.

The U.S. shale industry, meanwhile, surprised the world again with its ability to survive rock-bottom crude prices, churning out more supply than thought, even as the sell-off in oil slashed by two-thirds the number of drilling rigs in the country from a year ago. [RIG/U]

The United States also took a historic move in repealing a 40-year ban on U.S. crude exports to countries outside Canada, acknowledging the industry's growth.

John Kilduff, a partner at Again Capital, an energy hedge fund in New York commented on the continuing high U.S. oil production:

"You do have to tip your hat to the U.S. shale industry and their ongoing ability to drive down costs and hang in there, albeit by their fingernails."

Brent crude (LCOc1) was up 30 cents at $36.76 a barrel by 10:13 a.m. EST (1513 GMT), rebounding from a near 11-year low of $36.10 earlier in the session. For the month, it was down 17 percent and for the year, it fell 36 percent. In 2014, Brent lost 48 percent.

WTI (CLc1) rose 13 cents to $36.73 a barrel. It slid 12 percent in December and 31 percent for the year, after a 46 percent loss in 2014.

The immediate outlook for oil prices remains bleak. Goldman Sachs (N:GS) has said prices as low as $20 per barrel might be necessary to push enough production out of business and allow a rebalancing of the market.

Bjarne Schieldrop, chief commodity analyst at SEB in Oslo, commented:

"We have brimming oil inventories in Europe. And our predictions are that oil inventories in Asia are going to get closer to saturation in the first quarter."

Morgan Stanley (N:MS) cited ongoing increases in available global supplies, despite some cuts by U.S. shale drillers. The bank said in its outlook for next year:

"... headwinds (are) growing for 2016 oil. The hope for a rebalancing in 2016 continues to suffer serious setbacks."

INDUSTRY PAIN

Brent prices briefly hit a 2004 bottom below $36 this year, effectively wiping out the gains from a decade-long commodity super-cycle sparked by China's unprecedented energy demand boom.

The downturn has caused pain across the energy supply chain, including shippers, private oil drillers and oil-dependent countries from Venezuela and Russia to the Middle East.

Analysts estimate global crude production exceeds demand by anywhere between half a million and 2 million barrels every day. This means that even the most aggressive estimates of expected U.S. production cuts of 500,000 bpd for 2016 would be unlikely to fully rebalance the market.

Oil began falling in mid-2014 as surging output from OPEC, Russia and U.S. shale producers outpaced demand. The downturn accelerated at the end of 2014 after a Saudi-led OPEC decision to keep production high to defend global market share rather than cut output to support prices.

OPEC failed to agree on any production targets at its Dec. 4 meeting in Vienna, cementing its decision to protect market share, as the organization braces for the return of Iranian exports to the market after the lifting of Western sanctions.

Russia and OPEC show no signs of reining in production, leading traders to establish record high active short positions in the market <1067651MSHT> that would profit from further crude price falls.

Natural Gas

Natural gas futures held on to sharp gains on Thursday, the last trading day of the year, after data showed U.S. natural gas supplies in storage fell more than expected last week.

Natural gas for delivery in February on the New York Mercantile Exchange rallied 11.1 cents, or 5.04%, to trade at $2.325 per million British thermal units during U.S. morning hours. Prices were at around $2.333 prior to the release of the supply data.

Trading volumes are expected to remain light, reducing liquidity in the market which could result in exaggerated moves.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended December 25 fell by 58 billion cubic feet, broadly in line with expectations for a decline of 57 billion.

That compared with a drawdown of 32 billion cubic feet in the prior week, 26 billion cubic feet in the same week last year, while the five-year average change for the week is a drawdown of 98 billion cubic feet.

Total U.S. natural gas storage stood at 3.756 trillion cubic feet, 14.2% higher than levels at this time a year ago and 12.0% above the five-year average for this time of year.

A day earlier, natural gas tanked 15.6 cents, or 6.58%, as updated weather forecasting models predicted that chilly winter conditions across the U.S. Midwest and Northeast are not expected to last for more than a week.

Natural gas typically rises ahead of the winter as colder weather sparks heating demand, yet an unusually mild start to winter due to the El Niño weather phenomenon has limited the amount of heating days.

The heating season from November through March is the peak demand period for U.S. gas consumption.

Prices of the fuel are up nearly 26% since falling to a 17-year low of $1.684 on December 18, as forecasts called for a return to cool weather, following a warm spell. Despite recent gains, prices of the fuel are still down nearly 20% so far this year, as weak demand and healthy stockpiles weighed.

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