Speculators bet on oil price falling as low as US$15 a barrel; US home resales tank, US Q3 GDP comes in at 2%, more stimulus & longer yuan trading hours in China, bearish iron ore outlook, NZ$ above US68 cents

Here’s our summary of the key events from overnight that affect New Zealand. 

Oil is once again in the news with reports speculators are buying options contracts that will only pay out if the crude price falls as low as US$15 a barrel in 2016. These bearish bets come with the Organisation of Petroleum Exporting Countries (OPEC) effectively scrapping output limits, Iran’s expected return to the market, and the resilience of production from the likes of Russia raising the prospects of a prolonged oil glut.

Investors are buying put options, giving them the right to sell at a predetermined price and time, at strike prices as low as US$15 a barrel, according to the New York Mercantile Exchange and the US Depository Trust & Clearing Corp. West Texas Intermediate, the US benchmark, is currently trading around US$36 a barrel near 11-year lows, with Brent crude at similar levels.

Meanwhile in the UK record high December temperatures have left the country with its highest stocks of oil for five years with Europe bound fuel tankers forced into mid-Atlantic u-turns. The head of commodities research at Goldman Sachs says oil prices could fall to US$20 a barrel to force production shutdowns if mild weather continues to dampen demand.

In the US home resales recorded their biggest fall in five years in November, down 10.5% to 4.76 million units, versus economists’ expectations for 5.35 million sales. The National Association of Realtors is blaming new regulations aimed at simplifying paperwork for home purchasing. The median price rose 6.3% to US$220,300.

Staying in the US, third quarter GDP rose at a revised 2% annualised rate against the median forecast of 1.9%.

In China authorities have asked banks to test longer trading hours for the yuan in a move to support China’s push to increase global yuan usage after the International Monetary Fund admitted the currency into its reserve basket. This comes after Chinese leaders yesterday hinted at more stimulus for their slowing economy as they target 6.5% growth in 2016.

In a direct impact from the slowing Chinese economy, Australia’s Department of Industry & Science says iron ore prices will average $41.30 a metric tonne next year, down almost $10 from its September forecast. The department cut its average price for 2015 by 4.7% to $50.40 a tonne. The iron ore price is down 43% this year.

The Kiwi dollar is at US68.09 cents this morning, AU94.17c, and the Trade Weighted Index (TWI-5) is at 73.32. If you want to catch up with all the local changes from yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

This is our last 90 at 9 for 2015. David Chaston will provide regular holiday briefing reports over the festive season. Merry Christmas and Happy New Year to all our readers and viewers! 

Daily exchange rates

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