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© Reuters.
Investing.com – Here's an overview of three things that were under the radar this week.
1. Will the magic of Valentine's Day continue for oil?
Do oil bulls go to the races? Those who play for a long time or who play against the United States would have rubbed their hands while the United Kingdom reached the key level of $ 65 per barrel this week.
But if analysts at Morgan Stanley (NYSE 🙂 are right, it's probably as much love as oil will have in the short term.
"We continue to see a slight rise for Brent to $ 65 / bbl in 2H," Wall Street said in an energy note this week, referring to the outlook for the second half.
Morgan Stanley acknowledges that supply has tightened as a result of continued reductions in Saudi production, as evidenced by the market rally since the Christmas threshold of about $ 50 for Brent and under $ 43 for the WTI.
But he maintains that a major imbalance has appeared and it is the presence of too much light oil.
This demand for gasoline, coupled with a modest demand for gasoline, is weighing on refinery margins and crude oil volumes.
"Low refining margins and weaker economic data mean that oil prices can only go up as much," he says.
The theory of an oil rally on weak bases has been reinforced by the rise of Thursday, following Saudi rumors about future production cuts and the optimism sparked by the negotiations. US-Chinese commercial, despite mitigating the weakness of the US crude supply. demand and economic data.
Scott Shelton, energy futures broker at ICAP (LON 🙂 in Durham, NC, notes that there has not been a real event on the market in recent days but that "prices are simply high".
According to the Energy Information Administration, a new wave of US light fuel oil is moving towards the market, stimulated by technology to free the production of shale formations.
These efforts could add 1.45 million barrels a day to US production this year, bringing production to a record 12.41 million barrels per day. Next year, production could rise by 790,000 barrels a day to a new record of 13.2 million barrels per day.
2. The salary increases here today are tomorrow
Small businesses have the gift of knowing when the economic wind is going to change. And they reported in a poll this week that problems may be on the horizon.
At a time when businesses are struggling with a shortage of skilled labor, a set of high salaries has proven to be an effective bait to attract the best talent.
But small businesses said this week that they were not planning to feed the machine at much longer wages, as they expect the economy to weaken, which will result in a cheaper labor force.
Short-term wages are increasing faster than expected future earnings, the pay gap, which measures the difference between what small businesses will pay now for work and what they are willing to pay to the future, is at the largest margin of history, according to a NFIB survey.
Economists have published a survey on domestic demand and extrapolated trends in hiring and wages across the economy. Wage growth is what keeps consumption and inflation at a steady pace, thus avoiding the risk of stabilization of the economy, unless made by the Federal Reserve or the government.
More importantly, the pay curve has moved quite parallel to the Treasury yield curve.
The inverted yield curves preceded each US recession in recent history from 15 months to about two years.
3. Leap of US government debt expectations
Public debt expectations rose sharply in January, according to a recent New York Federal Reserve poll released this week.
The median expected growth in debt for the coming years reached 9.1% last month, against 6.1% in December, the New York Fed said. It's the highest reading since September 2014, while it was 9.2%.
This could have repercussions on the market this year if the government advocated policies such as negative real interest rates to reduce the level of debt. The real interest rate of the 10-year Treasury, adjusted for inflation, is currently around 0.85%.
But until now, the Trump administration has shown no interest in reducing the level of debt.
When asked whether President Donald Trump would mention the state's debt or debt, the White House chief of staff, Mick Mulvaney, would have replied, " Nobody cares. "
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