Equant Analytics

April Trade Outlook

Equant Analytics
April 2017

What does trade tell us about the oil price? In the first Trade Outlook of 2017, we pointed to a somewhat negative outlook for oil prices. Although analysts at the time saw prices increasing as demand recovered and production stayed at similar levels, based on our trade forecast for oil, we felt that the picture was at best neutral and maybe slightly negative. This was in line with OECD thinking but the World Bank and the EIU at the time were both suggesting that prices would rise.

The reason for the more negative outlook that we had at the time was because of the very high correlation between world trade values and the oil price (Figure 1). This correlation, of 90%, does not tell us how the oil price will move. It simply tells us that it is highly correlated with trade values, which is reasonable since oil is the world’s third largest traded sector with a value of $1.9 trillion in 2015. However, it does tell us that if trade is projected to remain static, then there is a greater likelihood that oil prices will also remain static.

Figure 1:  Monthly value of world trade in oil (USDm) vs oil spot price (last price monthly), Jan 2010-Jan 2017
Source: Equant Analytics, 2017

Read the rest of the April Trade Outlook here

Dealing with the most challenging data issues

Countries tend to under-report

Our Solution: Data is mirrored using OECD techniques to ensure it is complete.

Currency fluctuations

Our Solution: Nominal values reported in USD using IMF/WTO average FX rates.

Confidential data can be suppressed

Our Solution: As our data is updated monthly, reporting inconsistencies are identified quickly.

Inclusion of services

Our Solution: Service data averages from OECD, Eurostat and UN sources are mirrored and refined to form a more accurate picture.

SITC versus HS codes

Our Solution: We collect and report Data in both SITC and HS codes.

Country exports do not equal imports

Our Solution: Data is calibrated so that exports equal imports for all flows (i.e. UK exports to US = US imports from UK).