Oil

• After all the positives related to Saudi Arabia’s MSCI watch list inclusion and optimism about Mohammed bin Salman (MBS) becoming the Saudi Crown Prince, oil prices may bring regional sentiment back down to earth again, as they are down roughly 20% since the start of the year. Even though crude inventories showed a larger than expected drawdown in the latest week according to the EIA, sliding by 2.45 million barrels to 509.1 million, oil prices remain heavy this morning with US production rising by 20,000 barrels a day last week, the EIA also reported. According to Bloomberg OPEC members are in talks about making further curbs to supply, but the cost of such an outcome if it succeeds will be to weigh further on growth, with our regional economic growth forecasts already being revised down this week. Certainly a lot for MBS to contend with as he takes over more reins of office in his new position.
• BoE Chief Economist Haldane added to the recent uncertainty about the outlook for UK interest rates yesterday saying he is ready to vote for a rate hike, surprising markets as he voted to keep policy settings unchanged last week. Haldane's stance contrasts with that of Governor Carney, who yesterday said that now is not the time to tighten policy. Haldane stated that ‘provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year.’ His vote to hike would bring the MPC into balance over whether to support a rate hike, although one of the other ‘hawks’ is leaving the MPC later this month, to be replaced by a ‘dove’. Nevertheless the debate about hiking UK rates is certainly heating up which is likely to add to the already politically induced volatility in GBP.
• The Reserve Bank of New Zealand held the policy rate at 1.75% overnight, as expected and a dovish bias was retained. Governor Wheeler again said ‘Monetary Policy will remain accommodative for a considerable period’, and highlighted that numerous uncertainties remain. The onus will remain on the inflation and growth data in a sense to prove Wheeler wrong.  

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