The Weekly Brief (01 February 2016)Contributor Global Markets Insights Strategy Team
Last week’s wild oil price moves over murmurs that Russia and OPEC might cut production highlighted that global oil supply - not weak demand - has been behind recent moves in the price of oil.
Future supply changes, driven by international negotiations and breakeven costs of extraction, will be difficult to predict in the short term. But what we do know is that global demand for oil has been growing over the past 5 years. The continued growth of oil demand indicates a still healthy global economy. In the past falls in corporate revenues have coincided with falls in demand for oil. This time around, excess supply drove oil prices lower, which, along with the strong US dollar, hit S&P 500 revenues - but we should soon be due a rebound in corporate revenues as consumers and businesses start spending the windfall.
Global oil demand and S&P 500 revenue growth
Source: US Energy Information Administration, S&P 500, FactSet, J.P. Morgan Asset Management; data as of 28 January 2016. Oil consumption growth is 12 month moving average.
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