Stay away from Oil and Gold Investing. The rush is over for at least 20 years. Ruchir Sharma, Portfolio Manager, Morgan Stanley

The wreckage caused by China’s great, juddering slowdown continues to spread far beyond the country’s shores. Although most commodities enjoyed a bounce on May 3, after better-than-expected U.S. employment data, the plunge in their prices over the past few months suggests the past decade’s rally is truly broken.

For those of us not in the mining industry, this is actually good news — one of the best signs yet that the global economy is returning to normal.
China’s voracious demand for every conceivable raw material — oil, steel, soybeans, gold, to name a few — once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations. This was a Malthusian vision of scarcity: Rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources. Gas prices would never come back down; gold would cost thousands of dollars an ounce.
The response, for many international investors, was to bet big on China. Because it is hard to buy directly into China, many instead bought into the commodities that were being sucked into the gaping maw of the country’s economy: oil from Russia, iron ore from Australia and so on.
The China-commodity connection was born. Financial entrepreneurs started exchange-traded funds, which allowed individual investors to trade commodities, including silver and gold, as if they were stocks.

Supercycle Started

For the first time, U.S. pension funds started to allocate a share of their holdings to commodities. Even the Federal Reserve got involved, inadvertently, by printing so much money that a good portion of it wound up fueling speculative bets on China and the big emerging markets, often using commodities as a proxy.
Prices went parabolic. From 2000 to 2011, copper prices rose 450 percent, oil prices 365 percent, and gold prices more than 500 percent to a high of more than $1,900 an ounce. There was talk of oil hitting $200 a barrel, and gold reaching $10,000 an ounce. It was a wild time, all predicated on the idea that the rise of China had set off a commodity “supercycle” that could keep prices high indefinitely.
Commodity prices, such as that of gold, tend to rise when faith in the financial system is in decline and usually fall when confidence is high. In this they resemble the politician of whom Winston Churchill once said: “He has all the virtues I dislike and none of the vices I admire.”

Renewable energy would be the real winner in a world of cheap, stable fossil fuels, which no longer need massive subsidies.

 Crude-oil prices have remained high and volatile over the last decade, rising by nearly five times since the turn of the century. This speculation-induced volatility  and surging prices have been particularly high in Brent futures – bets on the future price of North Sea oil – since 2005. Though global consumption of oil has risen only marginally since then, by less than 1% per year on average, the price of Brent crude has jumped threefold.



Analysts including Forbes writer Robert Lenzner estimate that nearly a quarter of the price of a barrel of oil is the result of speculation. That works out at around US$23.39 per barrel. With 88 million barrels consumed every 24 hours, speculation is costing a whopping US$2 billion plus each day. Even if half the speculation could be whittled down, there would be an annual net saving of around US$400 billion of taxpayers’ money across the globe.

Lower energy prices would enable politicians around the world to remove the US$400 billion in subsidies currently given to the fossil-fuel industry each year. Part of this sum could then be reallocated to renewable-energy producers.

Fossil fuels hijack renewable subsidies

The struggle to hog energy subsidies began nearly 50 years ago, when the powerful fossil-fuel lobby hijacked the energy subsidy platform with the concept of carbon trading, an ingenious incentive to carbon emitters. In 1966, Thomas Crocker, a novice student of economics from Wisconsin with no industrial experience, was asked to research and collect data on pollution emanating from Florida’s fertiliser plants for a conference in Washington DC. In absence of data, Crocker suggested a unique strategy of penalising carbon producers with a trading option later known as cap-and-trade.

The fossil-fuel lobby quickly converted this into an incentive scheme for energy producers, where energy traders could sell allotted carbon credits and make a killing if they produced less carbon than an amount they had previously agreed. There was no independent benchmarking to assess whether the figures they agreed were optimum and would really reduce the global atmospheric carbon content in the future.

The Kyoto Treaty of 1997, signed by the world’s major energy consumers barring the United States, heralded an era of carbon trading, in which Europe’s energy producers made millions by selling carbon credits and jacking up energy prices in the name of reducing pollution. It made the energy user pay for pollution while handing incentives to the carbon emitter, who was increasingly lax in curbing emissions in the absence of third-party audited verifications of data. Power plant layouts and complex multipoint verifications make it literally impossible to assess the authenticity of emission data that is too complex to control and too easy to rig.

While Wall Street banks and carbon producers made money trading carbon credits and the EU spent billions of taxpayer funds subsidising polluters, emissions kept on rising both inside and outside Europe. Months before the Copenhagen conference of 2009, when high emission data and carbon-credit frauds started tumbling out of the closet, Crocker – the father of cap-and-trade – admitted it was a faulty concept and one incapable of reducing global emissions in an interview with the Wall Street Journal. However five decades of cap-and-trade theory ruling the roost had passed and billions already had been spent subsidising the carbon emitter instead of directly supporting the producers of renewable energy.

The Wall Street influence

Technologists who understood the mechanics of energy and carbon control were relegated to the background as economists and bankers took control of global climate-change strategy. They converted climate change into an exercise of esoteric fund management. And they devised obscure and complex documentation that triggered over 15 years of political wrangling under the United Nations-led climate-change negotiations.

As long as Wall Street banks and associated economists continue to influence the political decision–makers, they will add an element of trade or mortgage to every aspect of the energy industry in the pursuit of profit. They do not understand the renewable-energy industry – its growth, the way it operates – or the complexities of managing modern energy plants and integrating them with the renewables sector. Political leaders, often ignorant, pliable or both, are too troubled by managing their own economies to push forward a radical transformation that brings technologists to the fore in issues of sustainable development.

The world needs simple but quick solutions to solve the climate-change problem. If the most important element is getting the right people to do the job, the second most important is choosing the right technologies, ones that are worth the money and minimise the burden on taxpayers. Wind power, solar power and electric vehicles are just three options that need be pursued to get the best bang for buck. The consumer will always have a tendency to choose the cheapest energy options and so only technologies capable of mounting a serious challenge to fossil fuels should be pursued, and those single-mindedly.

More direct spending on renewables

Offshore wind-power stations in Germany have already brought down the price of generation to below that of fossil fuels, though generation problems exist because wind power is a fluctuating source. European smart-grid architecture is expected in the near future to answer some of today’s problems around wind and solar power by integrating diverse sources into a common stable grid. Electric two-wheelers, or e-bikes, already pose a serious challenge to fossil-fuelled counterparts, especially in China where over 200 million commuters use electric bikes and scooters on a daily basis.

Nations need to invest in renewable energy technologies that deliver, just as they need to invest in roads, bridges, mining and space and defence technologies. Not all projects will give a high return on investment and there will be some dry wells and false starts along the way, just as with oil drilling, space programmes or missile shields. Advances in solar and wind technology in Spain and Germany, China and India, show that the United States may not be the dominant player in the renewable-energy industry in the future.

Leaders who think ahead and take the calculated risk to invest in the right areas can pull off astounding results in renewable energy. The eurozone debt crisis will prove a dampener in the process no doubt, but if fossil-fuel prices can be tempered and subsidies re-directed, there will be no stopping renewable energy.

For more than a decade speculators have manipulated energy markets, forcing up the price of oil and the subsidies that go with it.


Fossil fuels are the most subsidised commodity on earth. Government spending to reduce the price of oil, gas and coal – through tax-breaks, giveaways, price controls and other methods – rose to US$409 billion in 2010, six times more than the US$66 billion allocated for renewable energy, according to figures released last year by the International Energy Agency (IEA).

In an age when the world is supposed to be weaning itself off carbon-intensive energy sources, why is this happening? Much of the blame can be laid at the door of the speculators whose market manipulations have made oil-prices volatile and high over the past decade. Here lies the solution too: get a handle on the speculation, and the need for hand-outs all but disappears.

Why are fossil fuels subsidised?

The key rationale for subsidising fossil fuels is that energy is an essential commodity for every household, and governments need to make it affordable for all. Nearly two thirds of fossil-fuel subsidies go towards reducing the energy cost of the poor and the middle class in emerging economies. These include subsidies that China and India hand out through a leaky distribution system to their middle classes. And they also include the subsidies doled out by oil producers Saudi Arabia and Venezuela to their populations, so heavy they keep fossil-fuel prices lower than those of water and create high and wasteful consumption.


Globally, in fact, fossil-fuel subsidies have a poor record of helping the very poor: the IEA estimates that just 8% of aid reached the poorest 20% of each country’s population in 2010. Kerryn Lang of the International Institute for Sustainable Development, a Geneva-based non-profit studying global subsidy patterns, said that many subsidies tend to be detrimental because they cause distortions in the economy, create vested interests and are subject to misuse.

Apart from the US$280 billion given mostly in developing nations to lessen the energy cost of the poor, the enormous global subsidy bill for 2010 included US$125 billion given by OECD (developed) and OPEC (oil-producing) nations directly to oil majors to boost production.


When oil was stable

State support to the fossil-fuel industry has grown over the last decade in line with a rise in the price of crude and market volatility. Back in 1970, the price of crude oil was around US$3.5 per barrel, close to the production cost. The Yom Kippur war between Israel and a coalition of Arab states in 1973, followed by an oil embargo on western countries, and the Iraq-Iran conflict, pushed prices up to US$30 a barrel by 1981. But afterwards, oil prices steadily dropped for nearly two decades due to creation of adequate reserve capacity of oil by western economies to offset the once too often reduction in supply from the Middle East.

Even the Kuwait-Iraq Gulf war of the 1990s, which witnessed massive refinery burning and oil-field blasting, failed to trigger a sharp upsurge in fuel prices. While oil consumption went up by 6.2 million barrels per day from 1990 to 1997, energy prices were stable despite wars and hurricanes, snowstorms and refinery disruptions.        


The Enron era

Then Enron arrived. The politically connected US corporation would singlehandedly change the rules of the game in energy supply. In 1996, California’s energy trading laws were deregulated and the future markets were allowed unrestricted trading following hard lobbying by Enron. The regulatory changes permitted energy traders the privilege of doing business in closed-door, private exchanges and exempted energy swaps from regulatory oversight, the key concepts behind its web-based transaction system, EnronOnline.

This started a sequence of high-level demand manipulations which finally resulted in the Californian energy crisis of 2001, when power prices rose by up to 20 times and blackouts were rampant, even though consumption in the state was just 28 gigawatts against a generating capacity of 45 gigawatts. Energy traders took power plants off line for maintenance ahead of peak demand to create artificial shortages, causing the price spikes in California’s energy spot market.

Strategies to manipulate the market – given names like Fatboy, Death Star and Ping Pong by traders – became the norm. Megawatt laundering, where power was bought cheaply, flipped out of California to an intermediary and then resold to the state at an inflated price, was rife, as was roundtrip cross trading – the constant buying and selling of a particular commodity to inflate transaction volumes and raise prices. After the Enron scandal broke and the regulators started investigations in the United States, the energy traders who had scented profits shifted base to London.

Among the early movers was Jeffrey Sprecher of Western Power Group, who had purchased the Atlanta based Continental Power Exchange in 1997. Sprecher reportedly presented his business plan for online energy trading to the then commodities chiefs at Morgan Stanley and Goldman Sachs – John Shapiro and Gary Cohn – as well as British Petroleum and Shell, all of whom agreed to do business with the start up in return for equity stakes. Other European banking and oil-trading giants like Deutsche Bank, Societe General and Total were later roped in to make the “cartel” complete.

Shapiro, who has since retired as head of commodity trade at Morgan Stanley told Business Week “At that time, Wall Street firms and energy companies were looking for a competitor to the deregulated exchange of EnronOnline. Jeff was very smart to realise that he had to give away a lot of equity.” This laid the foundation for the world’s most powerful trading alliance of big oil and big banks, working behind the closed doors of Sprecher’s deregulated ICE commodity exchange, where they – as stakeholders – could make their own laws.

Energy trading spurted at ICE soon after Enron’s collapse, when Sprecher acquired the International Petroleum Exchange in London and started crude-oil trading at ICE futures. They initially traded Brent crude (North Sea Oil), which constituted just 15% of global stocks, but whose physical supplies and prices could be fully controlled by the ICE trading coalition. Using similar practices to those seen in California – creating artificial shortages and round-trip trading between members – they caused prices to spike and created unprecedented volatility for the next decade.

British laws help build big oil cartel

A series of films by CBS News investigating the speculative oil bubble of 2008, which interviewed everyone from Dan Gilligan, president of the Petroleum Marketers Association of America to the Saudi oil minister, points to extensive speculation in the commodity futures market as the source of the problem. Senators Carl Levin and Dianne Feinstein have been trying to respond to this by plugging the regulatory gap known as the “London loophole”, which permits speculative trading without regulatory oversight in the ICE Exchange, but so far ICE backed by the Wall Street Banks, oil majors and UK laws, has managed to evade closer scrutiny.

As the reports by CBS showed, cartel members, who controlled the supply chain from pipelines to refineries, restricted physical supplies to raise prices. Morgan Stanley became one of the largest oil traders with 450,000 subsidiaries trading oil from its humungous tank farms, or oil depots, while planned maintenance outages and supply shortages at thousands of kilometres of pipelines owned by Goldman Sachs and other members kept oil panic and prices high. This was a repeat of the plan that led to the California energy crisis, though much more sophisticated in execution and more widespread, with trading data from the commodity exchanges not available for scrutiny.

The high profitability of trading at the ICE deregulated exchange soon attracted the big Swiss commodity traders, like Glencore, Vitol and Trafigura, who controlled large parts of physical supplies of African and Dubai crude oil. Soon, oil volatility became a global phenomenon, disconnected from real supply and demand.

The 2008 oil-price spike to US$145 a barrel reportedly came as consumption of oil was falling and supply was on the rise. Global banks channeled hundreds of billions of dollars from pension funds into oil speculation, making the real consumer and retailer look like a flea on an elephant’s back.

The peak oil myth

Oil supply today is no longer “peaking”, thanks to new technologies like horizontal drilling, which have augmented supplies from new and existing wells. But that has not stabilised prices as you might expect. Nor has the entry of cheaper shale gas as an energy substitute affected prices outside of the US.

Rather, supply-chain manipulations by Big Oil and Big Banks have kept the prices of  crude well over US$100 a barrel for months, making feasible the entry of expensive and carbon-intensive sourcing like the oil production from the “Tar sands of Canada”. While oil from Saudi Arabia takes less than US$10 to drill, Canadian tar-sands oil has a production cost of US$60 per barrel. This highly carbon-intensive source would not be viable if the price of crude oil had not been pushed so high.

Last year, when oil prices shot up to over US$120 a barrel, actual consumption of oil fell by over 5% and new supplies grew by 8%. Panic caused by Arab unrest, supply-chain manipulations and the diversion of liquidity to revitalise banks saw oil prices move up despite falling demand. Given the current situation between Iran and Israel and the unsolved Syrian crisis, more volatility in crude is expected early next year if the strife escalates after the US elections.

Forbes reported in February that speculation in crude oil may have added as much as US$23.39 to the price of a single barrel, nearly a quarter of the current price. If such speculation were curbed, subsidies for fossil fuel could be nearly negligible. The immense task of controlling billions of high-speed trading transactions at the futures market, 95% of which are not related to physical trading but affect pricing, makes a mockery of regulators, who are either incapacitated or co-opted into the system.

So what can be done? The Financial Transaction Tax proposed by the European Commission, which proposes to tax every monetary transaction and is bitterly opposed by London, could to some extent curtail the problem. This because it would be unviable to indulge in multiple trading rotations and pay tax every time, while the tax-linked system would also automatically help to trace the source of any such round-trip trading transactions.

Meanwhile, the United States and China have devised methods by which they are buying crude oil at a cheaper price than the rest of the world. These methods are not regulatory in nature but are market-based techniques to risk-manage volatile markets. Can the rest of the world follow their lead and limit speculation?

To rid the world of fossil-fuel subsidies, oil prices need to be stabilised. China and the US have made a good start.

 The US oil popularly known as “Texas crude” is a lighter and sweeter grade than Brent crude from the North Sea. It has the lowest sulphur content among comparable crudes – at 0.24% – followed by Brent, at 0.37%. As the light and sweet grades are easier to process for common retail fuels like petrol, and they create low pollution, they have historically been more expensive than their heavier counterparts. The price of Texas crude was  traditionally around 5% higher than that of Brent sweet, which in turn sold at a premium over sour grades like Dubai and Venezuelan crudes.

But over the past year, something remarkable has happened. Texas crude is now at least 20% cheaper than Brent. This dramatic turnaround is rooted in US energy-security policy – and offers insights into prospects for calming the volatile oil market.  If other large consumers follow the US lead, they could reduce volatility and the price of crude oil, thus freeing up billions of dollars currently locked up in fossil-fuel subsidies

How Texas crude got cheaper

The West Texas Intermediate [WTI] index of crude is benchmarked from the Cushing hub, the world’s largest crude storage facility located in the state of Oklahoma. The price of Texas crude usually fluctuates with the amount of inventories at Cushing because the buying can be modulated by the tank-farm owners when inventories are high to avoid price peaks. President Obama’s “all of the above” energy strategy – increasing US offshore and shale-oil production as well buying from reliable American sources like Canada and Brazil to reduce dependence on Gulf imports – anticipated rightly that increasing domestic storage and production capacity would reduce prices as well as long-term dependence on oil from volatile regions.

The strategy included a major thrust towards domestic storage, pipelines, refineries and drilling, with federal funds allocated in the energy budget for each sector. At the end of 2009, the installed tank-farm capacity of crude oil at Cushing was 46.3 million tonnes with a stored inventory level of around 30 million tonnes. By May 2012, the installed tank-farm capacity at Cushing was a third more, while stored crude went up by 50% to 44 million tonnes.



The jump in domestic storage capacity at Cushing and the decision to reduce dependence on foreign oil has had a salutary effect on the price of Texas crude. Over the past year, as inventory capacity at Cushing has risen, the spread between WTI and Brent oil has reversed, leaving the superior Texas crude priced at least 20% lower than the Brent sweet grade. In effect, the Midwest Americans who in the past were buying oil at higher prices reduced their energy costs by a quarter compared to their European or Asian counterparts within a year of increased storage. Now, with a network of pipelines connecting the Midwest to coastal refineries, the benefits of higher inventory levels will soon be felt throughout the United States.

The recently commissioned Seaway pipeline, which reverse-pumps 150,000 barrels of crude from the Midwest to the offshore refineries at Freeport Texas, is set to pump 850,000 barrels a day by 2014. This would help the cheaper domestic shale-oil further reduce imports that have already dropped by nearly 10% during the Obama years. Will the gap between Texas and Brent oil grow further, or will it shrink? And why are other Asian and European nations not stepping up their stored oil reserves to temper the speculation in oil prices?



China builds crude carrier fleet

The United States is not the only country to have used market-based techniques to temper buying prices of crude oil. Another big energy user, China, has been doing the same. This is despite the fact that China has not enjoyed the enormous storage capacities built up by the US since the OPEC oil embargo of the 1970s. Rather, China had less than 100 million barrels of storage capacity when oil spiked to US$145 per barrel in the summer of 2008, months before the crash of global financial markets in September that year.

But China too sensed the problem and had the financial muscle to put its plans into operation quickly. Chinese shipping giant COSCO had already taken action to augment its oil-tanker capacity, which would help it build inventory levels by placing orders for 20 bulk oil carriers with state-of-the-art Greek Shipyard Piraeus at a cost of US$2.3 billion. Eventually, it not only increased the purchases of crude carriers, but also invested in Piraeus.

Chinese leaders were aware that energy costs would spike again when the economy recovered and it would be important to augment both storage and handling capacity of crude oil. So while the Greeks started delivering the oil tankers, China started simultaneously leasing out the very large crude carriers (VLCCs) directly from the markets, giving a double boost to their handling capacity.

The global recession had already severely damaged the tanker trade and hiring rates had dipped below US$1 per barrel per month. By January 2010, China had started buying oil far in excess of its monthly needs. It was hiring tankers to store oil at sea, taking advantage of favourable conditions in the futures market – where oil traders bid on the hypothetical pricing of crude oil say six months or a year down the line. In January 2010, the margins in the futures market were such that a trader who bought oil at US$80 a barrel that month could make a profit of US$5 per barrel by simply holding the oil at sea for three months. By holding onto it until September, they could make US$12 a barrel

Such highly speculative positions of the future markets brought immense profits to future traders but also opened opportunities for bulk buyers like US and China who stepped in to spike the profiteering.



Both the US and China stepped up purchases of crude oil when prices ebbed, and slowed buying during peaks. Mitigating risk through “price inversions”, that is heavy buying when prices dip and stopping purchases during price surges, is a time-tested method to reduce price volatility. This makes it difficult for the speculators to hold stocks as the cost of storage is often more if market prices dip due to sudden slackness in demand from big buyers. When China and the US stockpiled heavily in the first half of 2010, hedge funds, Wall Street banks and bull operators panicked and squared up.

Building storage critical to lower prices

China has made massive investments in building its tank farms and oil-tanker capacities over the last few years. Brightoil, a Chinese firm set up in 2009 with an asset base of over US$1.5 billion, sub-leased around 100,000 tonnes of storage capacity off Singapore and 450,000 tonnes in south China to become the largest regional trader of marine oil. Dutch chemical giant Vopak is helping China build a massive 32-million barrel crude oil storage facility at the southern island of Hainan at a cost of US$1 billion. An additional US$5 billion investment that would help raise China’s oil storage capacity to 500 million barrels by 2015 is in the works.

To temper oil prices and reduce volatility, major oil-consuming nations need to build their oil-tank farms to hold enough oil for at least 120 days of consumption. Currently, most OECD nations have 60 to 90 days storage capacity. China and India have 12 weeks and two weeks storage respectively. The Asian giants, as net importers, paid out over US$22 billion and US$21 billion respectively in subsidies last year. In real terms, this investment on tank farms would be around US$10 billion, which is less than the speculative losses incurred annually to buy crude oil. With 120 days storage capacity, the spot buying decisions in the futures markets that form nearly a quarter of the total buying each year can be conveniently modulated and prices reduced.

Reduction of oil prices is key to removing fossil fuel subsidies in most developing nations as well as in the United States. If oil subsidies are removed, billions of dollars of energy subsidies currently handed out can be pumped into the renewable energy sector, today the poor cousin due to the harsh economic realities of high energy prices.   

Crude oil prices were seen trading lower on the last day of the trading week while oil traders express their worries over oil demand from China as reports revealed a contraction in China’s manufacturing sector.
The North American West Texas Intermediate delivery slid 0.55% lower, trading at $97.70 per barrel on the New York Mercantile Exchange as of the time of writing, at the same time Brent crude oil for March settlement fell 0.34% lower to $107.59 per barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $10.01 to WTI.
The Dollar index, which monitors the strength of the greenback against a basket of six major currencies, came in 0.02% higher to 81.100 points.

Crude – Chinese Manufacturing Sector

For the first time in six months, China’s manufacturing sector contracted, highlight the government’s vow to keep the nation’s economy steady.
HSBC’s final PMI for January weakened, standing at 49.5, dropping from the previous reading of 49.6 seen last week. Any reading above 50 indicated the rise in manufacturing activity, while any reading below 50 points a contraction.
The PMI manufacturing report by China Federation of Logistics and Purchasing, which will be released on Saturday, is expected to show that manufacturing activity dropped to 50.5 points in January; compared to the previous reading of 51 points seen in December.

Crude – US GDP

The world’s largest economy expanded by 3.2% at annualize pace, meeting in line with estimates , driven by the housing sector and higher trade receipts, which both rose to its highest in nearly three years.

Crude oil trading could result in the price of the commodity experiencing substantial gains if the predictions of widespread economic growth provided by market participants end up having some accuracy.
The forecasts that have been made about how well global business conditions will fare in 2014 and after could play a key role in the performance of crude oil, as the expectations that investors have for the worldwide economy are a crucial contributor to the price of the commodity.
The global economy should expand more rapidly this year than it did in 2013, at least according to the most recent estimates released by the International Monetary Fund in the latest update to its World Economic Outlook.

IMF bolsters 2014 global growth estimate

The organization forecast that in 2014, gross domestic product will grow at a rate of 3.7 percent. This figure was 0.1 percent higher than the estimate that it provided in the prior update to the WEO, which was made in October. In addition, this pace will hasten slightly in 2015, reaching an annual rate of 3.9 percent.
While the financial institution increased its forecast for global growth, a recent poll conducted by Bloomberg revealed that the majority of participants believe that the global economic outlook is getting better. The survey, which involved close to 500 traders, investors and analysts who subscribe to the media outlet, revealed that 59 percent of participants had this optimistic view.
“Developed countries are playing by far the most important part of the recovery in confidence, in markets and in the economy,” Wilhelm Schroeder, who works in Munich as managing director of Schroeder Equities GmbH and contributed to the poll, told the news source. “Without doubt, confidence is the single most important determinant for growth.”

Growth forecasts increased for several nations

The IMF also increased its growth predictions for the economies of several nations, including that of the U.S., Reuters reported. The organization forecast that in 2014, the GDP of the world’s largest economy would grow at a rate of 2.8 percent.
Such growth would certainly represent an improvement, as the nation’s economy expanded at a 1.9 percent pace in 2013, according to figures provided in the IMF report. The document released by the organization noted that declining headwinds from fiscal policy, and the subsequent impact that this should have on domestic demand, will help speed up the U.S. recovery.

Conference Board provides encouraging data for U.S.

This prediction that the American economy will grow more quickly in 2014 is supported by a December measure of leading indicators for the North American nation, Bloomberg reported. Data provided by the Conference Board revealed that during the month, the organization’s outlook for the coming three-to-six month period was 0.1 percent higher than the most recent rendition.

“It’s still consistent with a stronger economy in 2014,” Scott Anderson, who works in San Francisco at Bank of the West as chief economist, stated before the report was released, according to the news source. “We expect a healthier consumer, better business spending and somewhat faster job growth.”
The perception that economic conditions are improving was also supported by the most recent jobless claims report, which was released on Jan. 23, and revealed that during the prior week, the number of people who filed initial applications for these benefits lingered close to its lowest in six weeks, according to the news source.

The labor market is seen by many as being a key indicator of the strength of the economy. The improvement in this crucial measure was noted by Jim Diffley, a senior director at IHS and also the lead author of a report on U.S. metropolitan areas that was recently released, according to USA Today. The document, which was generated by IHS Global Insight, forecast that in 2014, 356 of the 363 metropolitan areas will expand.
“We’re finally on an upward trajectory with good job growth,” Diffley told the media outlet. “The recovery has started to affect substantially everywhere.” He added that many regions will need to recover substantially to get back to the level they were at before the financial crisis. “Two thirds of metros have still not gotten back to 2007 or 2008 peak levels of employment, and half of those won’t get there for another three years,” Diffley told the news source. “Financial crises do not produce normal recessions in the U.S.”
Additional data provided by the Conference Board pointed to the U.S. economy being strong at the present time, according to Bloomberg. The December index of coincident indicators released by The Conference Board was 0.2 percent higher than during the month before.

“This latest report suggests steady growth this spring, but some uncertainties remain,” Ken Goldstein, who works for the Conference Board as an economist, said in a statement today, the media outlet reported. “Business caution and concern about unresolved federal budget battles persist, but the better-than-expected holiday season might point to

Over the past 13 weeks, crude inventories at the hub have fallen by nearly 17 million barrels, according to data from the U.S. Energy Information Administration. Draws have been declining in recent weeks, with stockpiles at Cushing down just 59,000 barrels in the week to Sept. 27, the EIA reported on Wednesday.
Brent crude for November rose by nearly $1 to trade just shy of $109 a barrel. U.S. crude settled up $2.06, or more than 2 percent to end at $104.10, snapping a three-day losing streak.
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Oil touched an 11-week high earlier this week, buoyed by fears of supply disruption if other Middle Eastern nations were drawn into the Syrian conflict.
Heavy fighting was reported in Aleppo, Syria's biggest city, on Tuesday, but an international peace conference on Syria is unlikely to be held before August due to differences between Russia and the West, a source at a meeting of Group of Eight leaders said.


U.S. oil prices rose to the highest level since September on Friday as tensions escalated between the U.S. and Syria.
WTI oil prices climbed more than a dollar to a session high of $98.25 a barrel, a level not reached since Sept. 17, 2012. Brent crude futures were up about $1.50 a barrel, reaching a session high of $106.64 a barrel, the highest price in over two months. Oil was trading slightly off the highs at midday.
Crude oil prices have been range-bound for more than a month until Thursday afternoon when it was reported that President Obama authorized shipment of U.S. weapons to Syrian rebels for the first time. The White House said it had proof that the Syrian government used chemical weapons against rebels. Oil prices extended their gains Friday morning