Market Insights – Week of August 17, 2015

August 19, 2015 • Posted in Market Insights

isisMarket Insights – Week of August 17, 2015

Energy / Economy Overview

  • Last week, China substantially devalued it’s currency in an effort to spur growth in its slowing export sector and the overall slowing Chinese economy
  • In the past 10 years, China has lost cost advantage to other developing countries and as a result China’s exports have fallen by about 8%
  • China’s domestic economy also is displaying weakness across a number of markets:

–China car sales fell 6.6% in July (year on year) after a 3.4% decrease in June

–China’s manufacturing sector has posted 5 consecutive months of contraction

  • Economic weakness in China and overproduction of oil globally is further weakening the price of oil, and some analysts are predicting a drop to $30/bbl
  • Since the Nov. 2014 OPEC meeting at which Saudi Arabia launched the effort to cut US production by dropping prices, aggregate production from the US, Saudi Arabia, and Iraq has increased 2 MM b/d—far more than global demand has increased
  • The US$ is strong and is helping drive weakness in oil and petrochemical prices
  • Weakening Chinese import demand and low petrochemical prices could mean difficulties for producers building new crackers and resin plants in the US

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