Get ready for the next financial crisis

The World Bank lowered the global growth outlook and offered a stark warning to perhaps trying to shake the markets out of their compliancy. Bloomberg News reports that The World Bank cut its global growth forecast amid weaker outlooks for the U.S., Russia and China, while calling on emerging markets to strengthen their economies before the Federal Reserve raises interest rates.

The Washington-based lender predicts the world economy will expand 2.8 percent this year, compared with a January projection of 3.2 percent. The U.S. forecast was reduced to 2.1 percent from 2.8 percent while outlooks for Brazil, Russia, India and China were also lowered. The setbacks may be temporary: the 2015 estimate for world economic growth was unchanged at 3.4 percent. "The global economy got off to a bumpy start this year buffeted by poor weather in the United States, financial market turbulence and the conflict in" Ukraine, the World Bank said in its Global Economic Prospects report yesterday. "Despite the early weakness, growth is expected to pick up speed as the year progresses." 

Yet at the same time The World Bank has warned that now is the time to prepare for the next financial crisis, identifying markets as still "skittish" and vulnerable to slowing global growth. OPEC on the other hand sees no sign of slowing oil demand. OPEC will continue to pump oil and seem to think that instead of cutting production they may have to actually start thinking about adding production. This pressure on OPEC comes even as the United States is booming on oil production. According to the Energy Information Administration U.S. crude oil production in May increased to the highest output for any month in 26 years and is on track next year to reach the highest annual production level since 1972.

Yet the disappointing production from Libya, Nigeria and the fact that Sunni militants taking over the City of Mosul in Iraq is suggesting that OPEC had better keep its pedal to the production metal. Bloomberg News reported that Militant fighters of the Islamic State of Iraq and Levant seized Mosul after battling government forces for control of the northern Iraqi city, extending their reach over the country as central authority crumbles. 

On top of that the deal between Russia and the Ukraine to keep gas flowing is not signed sealed or delivered. The market will watch with keen interest the talks that European Union on a gas-supply deal today after failing to reach agreement in discussions earlier this week. Bloomberg says that negotiations between Russian Energy Minister Alexander Novak and his Ukrainian counterpart, Yuri Prodan, along with EU Energy Commissioner Guenther Oettinger, will restart at 9:30 a.m. in Brussels and will follow bilateral meetings, the European Commission said late yesterday. The talks were postponed from last night because the Russian delegation was scheduled to arrive very late in Brussels, the EU executive said.

The other thing that traders will focus on is the Energy Information Administration supply report. WTI Crude (NYMEX:CLN14) gained on Brent (NYMEX:SCN14) as Cushing oil supply fell once again according to the American Petroleum Institute report. The API reported that Cushing supply fell by 2.1 million barrels last week. Over all crude inventories increased 1.45 million barrels in the week June 6 to 383.9 million, compared with Reuters expectations for a decrease of 1.9 million barrels. Refinery crude runs fell by 434,000 barrels per day, API data showed. Gasoline (NYMEX:RBN14) stocks fell by 441,000 barrels, compared with analysts' expectations in a Reuters poll for a 843,000-barrels gain. Distillate fuels stockpiles, which include diesel and heating oil, fell by 298,000 barrels, compared with expectations for a 1.2-million-barrel gain, the API data showed. U.S. crude imports fell last week by 345,000 barrels per day to 7.4 million bpd.

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