Oil prices appear to have found some stability over the last 24 hours after suffering some heavy losses since Friday. The decision by OPEC not to consider production cuts or announce a ceiling on output triggered another sell-off in oil and further declines could follow in the coming weeks. Brent crude fell below $40 a barrel for the first time since February 2009 on Tuesday and I feel we may not have to wait too long to see financial crisis lows of around $36.20. What's more, given the ongoing oversupply and reports of storage nearing capacity, much steeper losses could follow and Brent could find itself back at around $30, or lower.
With such a focus being on oil at the moment, U.S. EIA crude oil inventories data this afternoon is likely to be monitored closely. A report from the American Petroleum Institute on Tuesday suggested that supplies fell by 1.9 million barrels which some have attributed to the stabilisation in oil prices. Today's release is expected to show a build of 43,000 barrels which is far from the number reported by API on Tuesday.
Higher food prices and an easing of the deflationary trend in energy contributed largely to the improvement in Chinese inflation in November, as the latest CPI measure rose from 1.3% to 1.5%, compared to a year ago. While the former may be a one-off factor, the energy component is likely to become less of a drag going forward as last year's sharp decline in commodity prices begins the fall out of the annual comparison.
It's been a good week so far for Japan, which learned on Tuesday that it avoided recession in the third quarter, with the initial -0.2% reading being revised up to 0.3%. There was more good news today as data showed that machinery orders in October rose by 10.7% month on month, representing a jump of 10.3% compared to a year ago. With the data being seen as a good indicator of future capital expenditure, this bodes well for Japan in the coming quarters and may ease some of the pressure on the Bank of Japan to step up its bond buying program, at least for now.
For a look at all of today's economic events, check out our economic calendar.