The Week In Hindsight, 30 May 2014
WTI and Brent crude closed the week lower on Friday as a quiet economic calendar saw prices pulling away off last week’s highs almost from the outset. Poorer than expected US GDP figures added to downward momentum later in the week as investors reacted to news that the US economy contracted during Q1 as opposed to merely slowing like initial figures suggested.
Another factor driving prices lower was the successful election in Ukraine last weekend which saw the nation taking its first significant step toward stability by installing billionaire Petro Poroshenko as President. Within his first week in office, Poroshenko has resolved to rid Ukraine of any remaining rebels after refusing to negotiate with “terrorists”.
Inevitably this has led to further violence and more deaths on both sides of the divide however, with the seeds of a sustainable government now planted; the Ukraine crisis has began to recede from the forefront of investor’s minds. This has been reflected in the gold price which has fallen by $40 from its peak to trough.
Despite the decline in oil for the week, the overall outlook for both benchmarks going forward remains unchanged. This is that positive growth expectations are likely to support demand going into the second half of the year, while supply side disruptions across Libya and other parts of Africa are seen as likely to support prices.