Oil prices are carrying on the trend from the second half of 2014 and continuing to drop to lows not seen since 2009. Energy stocks overall on Wall Street were the worst performing of 2014.
The U.S. Dollar has continued its strong performance at the end of 2014, and this week has hit its highest level since March 2006. Problems for competitor economies in Asia and Europe have resulted in the dollar index, which measures dollar strength against several other major currencies, reporting 9 year highs of 90.90 as of this morning.
Against the Euro, the dollar has reached a four and a half year high and against the Yen, a seven and a half year high. All of this points to the U.S. being the global market leader early in 2015, in spite of the so-called oil price war with Saudi Arabia and job losses as the oil and gas industries respond to a lower price climate. Regardless of the worrying particulars of the U.S. energy scenario on its own, it is important to assess it in context: China’s economy is slowing as it moves from investment to consumption; Japan has fallen into recession and Russia faces a similar threat in the near future; and growth in Europe is crawling.
Surprising news has come from Russia as we begin the New Year, with oil output for 2014 reaching a record high average of 10.58 million barrells per day. The Russian Energy Ministry data also highlighted new records for oil and gas condensate production in December of 10.67 million bpd. Russian energy exports to China also reached new highs of over 22.6 million tons (452,000 bpd) with this forming an integral part to Russia’s post-sanctions strategy of diversifying its international energy clients with a specific focus on the Asian markets. The Energy ministry is forecasting a decline to 525 million tons in 2015 in light of falling oil prices and an impending recession, while the IEA is predicting a 1% drop in oil output overall for 2015. Gazprom released figures indicating an output drop of 9%, an all-time low, citing the war with Ukraine as the main reason.
Still it seems that anything can happen in 2015.
