Posted March 17, 2015 Thomas Meikle
I am thrilled to have won the trader of the month prize for February in my second month trading live.
February has proven to be a fascinating month in oil markets as investors stretch the price difference between Brent crude and WTI prices. The market is still grappling with the sizeable sell-off in oil prices caused by the worldwide glut of Brent crude, and despite a significant price retracement throughout February, many argue the case for another sell-off in the months to come. Economic growth is negative in Japan, negligible within the Eurozone and slowing in China, resulting in weak global demand for oil. US economic growth is showing some strength, but has averaged only 2.3% annually after the 2009 recession which is approximately half the rate expected from an economic rebound since the 1930s. The strength of the dollar is weighing on Oil as it is Dollar denominated. Combined with concerns about US oil inventories reaching full capacity and potential increased exports from Iran, the outlook for benchmark oil prices looks bleak. The current sensitivity of the market has caused some movement in the derivative products which I was fortunately able to take advantage of.
Alongside the downside speculation in oil prices, the ECB began their €60 Billion a month bond buying programme on the 9th March. With widespread structural economic issues throughout Europe, many are now waiting to see whether European QE will succeed in significantly lowering borrowing costs for struggling nations and encouraging business and consumer lending. Greece has been granted a four month bailout extension to help contain the debt mountain that stands at 175% of GDP, but Athens is now expected to rush through fiscal reforms in order to get access to more vital ECB funding. This uncertainty opened up opportunities in Euribor and Eurodollar markets.
In March we will see the impact of QE on STIRs markets, and I will look to increase my volume in those areas to capitalise on any moves. Meanwhile signature economic indicators like oil inventories and non-farm payrolls will be closely watched for any hint of oversupply of oil and US GDP weakness respectively. I am very much looking forward to claiming my prize of a F1 driving experience and making sure that this trader of the month prize is not my last.