Daily Outlook

Equity markets took a hit overnight as oil price volatility continues. US equities struggled overnight with lower oil prices and softer US data, with the DJIA and S&P500 closing in the red 1.14% and 1.25% respectively. European markets were also caught up on the selling with the DAX dropping 1.64% and the FTSE closing down 1.25%.

WTI dropped from $33.25/bbl to $31.43/bbl off the back of comments from OPEC members regarding previous negotiations of an output freeze.  At the IHS CERAWeek energy conference, Saudi Arabia’s oil minister Ali al-Naimi confirmed that Saudi Arabia will not cut production.  Consistently high prices had led to an influx of inefficient high-cost producers into the market. Producers will have to lower their costs, borrow cash or face liquidation as the Saudi’s production remains profitable at $20 a barrel. These comments come amid reports from Iran calling Saudi’s production freeze a ‘joke’. These comments further the divide inside OPEC, as Iran’s oil minister Bijan Zangeneh laments there is “less trust than normal” between oil producers.

GOLD rises 1% to $1223 rebounding from previous sessions losses as an improvement in market sentiment ran out of steam, supporting appetite for safe have assets. Gold prices have been well-supported in recent weeks amid growing speculation the Fed could delay the pace of its tightening for the remainder of 2016. Further easing from the BoJ as well as the ECB in March could see further strengthening in the precious metal.