6th March 2017, GTC Advisors – China Growth Estimates, Oil and Commodities Weaker?

GENEVA - March 6, 2017 - PRLog -- Oil prices stumbled in early trading this week as the National People's Congress in China embarked on its annual meeting.

Speaking in front of over 3,000 members, Premier Li Keqiang confirmed that growth for 2017 had been cut. Expectations are now set at growth rate of 6.5%, down from a forecasted 6.5 – 7% estimate. Last year's 6.5% figure was the slowest growth seen in over 26 years and this year's slowdown is put mainly down to lower demand for Oil and Commodities, as the government looks to reduce pollution, and tighter regulatory controls with regards to financial lending.

The world's second largest economy is still expanding at a relatively decent pace, however a curb in raw material imports will have a significant effect on commodities globally.

After last week's closing session gains of 1.5% on Brent and 1.4% on West Texas, Brent was still holding above $55.00 per barrel with West Texas just under $53.00 in Asian trading and looked to possibly go lower.

There are concerns that Russia, a non OPEC member is not sticking to the tentative agreement made late last year to curb output in an attempt to stabilize prices. Russian output for February was little changed from January, both posting production at 11.11mn barrels per day.

The timing of Russia's lack of reduction is balanced by the fact that Libya was due to start its production back up but on Friday armed militia retook control of two major oil ports from the military, keeping Libya's production effectively ground to a halt.

All this news, amid the probability of a rate increase in the US this month looks set to add some volatility into the commodity sector over the coming weeks. Many analysts feel a Federal Reserve rate increase is already accounted for in the price of Oil, however, a rate increase will inherently strengthen the USD which will no doubt have an impact on oil prices should there be more uncertainty from the middle east and Russia continues to produce at pre-agreement levels.

Whilst the price of oil does have a natural effect on the equity markets we feel that there is already a contingency for the commodity to see a reduction without there being too much of a pull back on stocks.

Sectors to watch over the next week or so will be Pharma, Energy and Infrastructure.

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