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Bank of Canada Expected to Hike in July






US Oil vs OPEC Production


Earlier today 14 OPEC member nations and 10 non-OPEC nations agreed to a nine-month extension to their existing production cap agreement struck in November of last year. This would keep the existing production cap in place through to next March in an effort to reduce a supply gut that had driven West Texas Intermediate (WTI) crude oil prices as low as $26/barrel in early-2016.
According to Bloomberg data, since November, 2016 OPEC production has fallen in excess of 2.2 million barrels per day. However, concerns have persisted that U.S. oil production (in particular shale oil) could offset OPEC’s supply cut. As of April, U.S. oil production has increased by 594 thousand barrels per day over the same period. Thus, the net result between OPEC’s supply reduction and the increase in U.S. production has been a decline of 1.651 million barrels per day as of the latest monthly data. Thus, notwithstanding a continued climb in U.S. output, we continue to see the OPEC+ supply cuts having their desired effect of reducing the global supply glut and helping to stabilize oil prices around the $50/barrel mark.


Liberal Democracies on the Decline?


Using Freedom House data (a U.S.-based non-governmental organization), we construct a “Global Democracy Index” (GDI) by calculating a global average of Freedom House’s country ratings of political rights and civil liberties over the 1973 to 2016 period. We then re-centered the data around zero with increasing/decreasing values representing improving/deteriorating democracy scores (index range +3 to -3). See our Strategy Chart of the Day below.
 It reveals that from the mid-1970’s to the mid-2000’s, our GDI consistently improved (i.e. on average countries were becoming more democratic), with significant gains seen in eastern Europe (the fall of the Berlin Wall) and Latin America over this period. However, since its peak in 2005 at 0.78, our GDI has steadily declined to 2016’s recent low of 0.63. Pressures emanating from structurally slower economic growth, a widening income gap, increased long-term unemployment, etc. are believed to be some of the reasons behind a global rise in populism / authoritarianism (thus the decline in the GDI) over the past decade which could maintain this trend in years to come.




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