Guest post: Big oil should exercise capital discipline as prices rise

Traditionally, higher prices tend to be followed by increased investment: management tend to be very reactive in their planning. Given that many companies have cut back budgets by over a third in the past two years, management are likely to find it har…

Traditionally, higher prices tend to be followed by increased investment: management tend to be very reactive in their planning. Given that many companies have cut back budgets by over a third in the past two years, management are likely to find it hard to resist the urge to make up for lost time and pour more money into the ground.

Continue reading: Guest post: Big oil should exercise capital discipline as prices rise

In Japan, my kingdom for a dollar hedge

Could the collapse of covered interest rate parity be the harbinger of even stranger things to come ? At the heart of the issue is how on earth the interest rate differential between two currencies in the cash money markets is no longer equal to the di…

Could the collapse of covered interest rate parity be the harbinger of even stranger things to come ? At the heart of the issue is how on earth the interest rate differential between two currencies in the cash money markets is no longer equal to the differential between the forward and spot exchange rates.

Continue reading: In Japan, my kingdom for a dollar hedge

Of $40 oil and forced SWF selling

You know who doesn’t like a falling oil price? Sovereign wealth funds for countries dependent on high oil prices and in love with their (endangered) petrodollars.
And a risk based on that dislike is a presumption of forced selling and equity market wea…

You know who doesn't like a falling oil price? Sovereign wealth funds for countries dependent on high oil prices and in love with their (endangered) petrodollars.

And a risk based on that dislike is a presumption of forced selling and equity market weakness becoming self-fulfilling as/ if oil prices slide. Stable oil prices means SWFs don't have to suddenly liquidate but the opposite would also seem to be true...

The last time JPM's Flows & Liquidity team looked at this risk they based it on a fall in Brent to an average price of $45 per barrel.

They now assume an average oil price of $40 for 2016 and also note that the "YTD average has already fallen to $42."

Continue reading: Of $40 oil and forced SWF selling