Daily Insight
Group Economics Macro & Financial Markets Research
21 April 2016
Who cares about Doha? Hans van Cleef Senior Energy Economist Tel: + 31 20 343 4679 hans.van.cleef@nl.abnamro.com Maritza Cabezas
Oil prices are bottoming out despite the failure of the Doha talks…
…this reflects the prospect that the market will gradually rebalance in any case
US housing data were mixed in March…
…but should improve moderately in the coming months
Senior Economist Tel: +31 20 343 5618 maritza.cabezas@nl.abnamro.com
After Doha oils prices fell… Expectations were high for the meeting between oil producing countries in Doha. This despite ongoing tensions between Saudi Arabia and Iran ahead of the meeting. Doha failed given that Saudi Arabia is only willing to freeze oil production if Iran also joins in the agreement. Iran had indicated far before the meeting that it would refrain from participating in a production freeze. Morover, although the aim of the meeting was to freeze output, most of the countries that were present actually don’t have the capacity to increase production. … but oil prices are regaining some traction regardless Initially oil prices dropped following the meeting, but the impact was partly offset by a strike by oil and gas workers in Kuwait. On Wednesday the strike in Kuwait came to an end and production will be back to last weeks' levels. Nevertheless, the demand-supply imbalance in the oil market looks set to gradually ease during the course of this year. The latest EIA inventory data, released on Wednesday, showed that US stocks rose less than expected. This fits our scenario that the global oversupply of oil will likely decline during the course of this year, resulting in higher oil prices. Indeed due to better than expected US demand data, crude oil prices are now at the highest level in 2016. We expect oil prices to reach 55 USD/bbl by the end of this year. In the meantime, volatility will remain high as investors intermitedly switch focus from speculation about production cuts or freezes on the one hand, and existing oversupply, on the other. US home builder sentiment steady in April… The latest US housing market data has been mixed. Although the housing market data is normally choppy, residential investment has given a boost to the economy in the past months. However, home builders have become more cautious. After eight months of readings above 60, the last three months were unchanged at 58. Looking at the details, April’s report suggests
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Daily Insight – Who cares about Doha? – 21 April 2016
that from a regional perspective sentiment was strongest in the West at 67, while the fall was mainly in the Northeast, where the index tumbled to 41. Homebuilder sentiment has been falling since October 2015, when the index peaked at 65.
US housing starts room for imporvement ‘000s
index
2500
80 70 60 50 40 30 20 10 0
2000 1500 1000 500 0 05
07
09
Housing starts (lhs)
11
13
15
Home builders sentiment (rhs)
Source: Thomson Reuters Datastream
… while housing data in March mixed Meanwhile, hard data on homebuilding were also poor. Housing starts fell 8.8% in March, from an upwardly revised 6.9% in February. Weaker housing starts are partly reflect payback for strong gains at the beginning of the year. Given the upward revisions in housing starts in the first quarter, our GDP forecast of 1% remains practically unchanged. More worrisome is the fall of March’s building permits, since this is a bellwether for construction in the coming time. The data was more positive for the purchase of previously owned homes - existing home sales - in March, which was stronger than expected, increasing 5.1% from -7.3% the previous month. This is a sign that the demand for housing remains strong. We expect housing activity to improve in the coming months. Low mortgage rates and a strong labour market should be supportive.
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Daily Insight – Who cares about Doha? – 21 April 2016
Day
Date
Time
Country
Monday Monday Monday
18/04/2016 18/04/2016 18/04/2016
14:30:00 14:30:00
US US US
NAHB home builders' confidence index Apr Fed's Dudley (voter) gives opnening remarks at Economic Conference Fed's Kashkari (non-voter) speaks in Minneapolis
Tuesday Tuesday Tuesday Tuesday Tuesday
19/04/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016
10:00:00 11:00:00 14:30:00
US KR EC DE US
Fed's Rosengren (voter)speaks Policy rate - % ECB Bank Lending survey ZEW index (expectation economic growth) Housing starts - % mom
Wednesday Wednesday Wednesday Wednesday
20/04/2016 20/04/2016 20/04/2016 20/04/2016
06:30:00 10:30:00 13:00:00 16:00:00
NL GB TR US
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016
07:30:00 08:45:00 10:30:00 13:45:00 13:45:00 13:45:00 14:30:00 14:30:00 16:00:00
Friday Friday
22/04/2016 22/04/2016
10:00:00 10:00:00
01:00:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
58
59
59
Apr-19 Q1 Apr Mar
1.50
1.50
1.50
11.2 -8.8
8.3 -0.9
9.0 0.0
Consumer confidence - index Change in claimant count - thousands Repo rate - % Existing home sales - % mom
Apr Mar Apr 20 Mar
1 6.7 7.5 5.1
-11.5 7.5 3.4
NL FR GB EC EC EC US US EC
Unemployment rate - % Business confidence manuf. - index Retail sales - % mom Main Refinancing rate - % Deposit Facility rate - % Marginal Lending Facility rate - % Initial jobless claims - thousands Philadelphia Fed - business confidence - index Consumer confidence
Mar Apr Mar Apr 21 Apr 21 Apr 21 Apr 16 Apr Apr P
6.5 101 -0.4 0.00 -0.40 0.25 253 12.4 -9.7
EC EC
PMI manufacturing - index Composite PMI output
Apr P Apr P
51.6 53.1
-2
3.5 6.5
101 -0.2 0.00 -0.40 0.25
0.00 -0.40 0.25
7.6 -9.4
-9.3
51.8 53.2
51.9 53.2
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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