Energy prices declined for the first time in 4 days, amidst concerns over rising Iraqi exports and US output. The front-month WTI crude oil contract settled at a 3 week low of 51.96, down -3.76%, while the Brent contract plunged -3.78% to close at 54.94. On refined oil products, heating oil and RBOB gasoline prices also declined -3.85% and -3.87% respectively. Precious metals were generally higher with gold and silver futures gaining almost +1%. British pound declined for a second consecutive day, with GBPUSD falling to the lowest in 2 months, as British Prime Minister Theresa May suggested Britain would have "completely new" relations with the EU after Brexit. Equities were mixed. Wall Street ended the day lower as energy shares slipped. The DJIA and S&P 500 indices dropped -0.38% and -0.35% respectively.
Iraq's oil ministry noted that oil exports from its southern Basra ports reached a record high of 3.51M bpd in December, though it affirmed that it would not affect the country's promise to reduce production. OPEC members are set to meet on January 21-22 to monitor compliance and agree on a "final monitoring mechanism". The market has been cautious over OPEC/non-OPEC output cut. Not only about OPEC's notorious compliance record, but also US' ramp up of shale investment in light of higher prices. Indeed, US' oil rig count has been rising over the past 10 months. Moreover, the US Congress has authorized the Department of Energy to sell off US$375.4M worth of oil. The sale could begin as soon as this month.
In the UK, concerns over the impact of Brexit reemerged. As PM Theresa May spoke in London, "it will be a new relationship because we won't be members of the EU any longer". The UK would "be outside the European Union and therefore we will be negotiating a new relationship across not just trading but other areas with the European Union". She also blamed the media, which have equated her view on Brexit to a hard one, should be responsible for the depreciation of the pound.
Released earlier today, headline CPI in China eased mildly to +2.1% y/y in December, from +2.3% a month ago. The moderation was mainly driven by food price which decelerated to +2.4% from November's +4%. Non-food inflation, however, picked up to +2% from +1.8% previously, resulting in steady core inflation (excluding food and energy) of +1.9%. PPI soared to +5.5% y/y in December, from +3.3% a month ago. The broadly based improvement marked the fastest increase in over 5 years, thanks to renminbi weakness and higher commodity prices.
Elsewhere, US consumer credit expanded +6.3% y/y in December. Separately, the Fed's Labour Market Conditions Index slipped -0.3 point in December, after rising +2.1 points in November. On Fed officials' comments, Boston Fed president Eric Rosengren noted that three rate hikes this year would be appropriate, adding that "a still-gradual but somewhat more regular increase in the federal funds rate will be warranted". Meanwhile, Atlanta Fed president Dennis Lockhart, a voter last year, reiterated his support for two hikes this year.