Stock outlook 2008

Oil has been an influential factor in the global economy, because it is needed for the industry. Oil price increase will influence global industry, products price, consumer spending, and inflation. Price of oil has climbed more than 40% last year(2007), reaching its record high of $99.29 a barrel on November 21. After achieving that peak, crude prices gradually decline to the $80 to $90 range. Many analysts expect it to break the psychologically level of $100 a barrel early in 2008. Oil prices is mainly influanced by its supply and demand, and geopolitical risk. To understand this, we must know the numbers.

Producers1	Total oil production	Exporters2	Net oil exports	Consumers3	Total oil consumption	Importers4	Net oil imports
1. Saudi Arabia	10.72	1. Saudi Arabia	8.65	1. United States	20.59	1. United States	12.22
2. Russia	9.67	2. Russia	6.57	2. China	7.27	2. Japan	5.10
3. United States	8.37	3. Norway	2.54	3. Japan	5.22	3. China	3.44
4. Iran	4.12	4. Iran	2.52	4. Russia	3.10	4. Germany	2.48
5. Mexico	3.71	5. United Arab Emirates	2.52	5. Germany	2.63	5. South Korea	2.15
6. China	3.84	6. Venezuela	2.20	6. India	2.53	6. France	1.89
7. Canada	3.23	7. Kuwait	2.15	7. Canada	2.22	7. India	1.69
8. United Arab Emirates	2.94	8. Nigeria	2.15	8. Brazil	2.12	8. Italy	1.56
9. Venezuela	2.81	9. Algeria	1.85	9. South Korea	2.12	9. Spain	1.56
10. Norway	2.79	10. Mexico	1.68	10. Saudi Arabia	2.07	10. Taiwan	0.94
11. Kuwait	2.67	11. Libya	1.52	11. Mexico	2.03
12. Nigeria	2.44	12. Iraq	1.43	12. France	1.97
13. Brazil	2.16	13. Angola	1.36	13. United Kingdom	1.82
14. Iraq	2.01	14. Kazakhstan	1.11	14. Italy	1.71

NOTE: OPEC members in italics.

1. Table includes all countries with
total oil production exceeding 2 million barrels per day in 2006.
Includes crude oil, natural gas liquids, condensate, refinery gain, and
other liquids.

2. Includes all countries with net
exports exceeding 1 million barrels per day in 2006.

3. Includes all countries that consumed
more than 2 million barrels per day in 2006.

4. Includes all countries that imported
more than 1 million barrels per day in 2006.

Source: Energy Information Administration
(EIA). http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm .

By looking at the above number (Exporters), we know that OPEC supplies more than 50% of the world demand. The top three importers are United States, Japan, and China. All three are the world economy giants.
From the demand and supply law, price will go up if supply is having trouble. Political conditions affect oil production in Iraq, Nigeria, Venezuela, and Iran. Iraq is still strugling to recover from decades of war. Nigerian production is affected by attacks and sabotage. Venezuelan oil production has never fully recovered since December
2002, when political strife brought Venezuelan production to a halt. Supply disruptions in Iran, the world's fourth-biggest exporter, is cause by a dispute with the West over
its nuclear program. Recently, tighter U.S. sanctions have also weighed on the oil price.
Strong economic growth has resulted in strong oil demand. The Paris-based International Energy Agency, or IEA - advisor to 27 industrialized nations - sees demand rising by 2.1 million barrels per day in 2008, an increase of 200,000 barrels per day from its previous forecast. The emerging market leaded by BRIC (Brazil, Rusia, India, and China) will still grows high. BRIC is in the top ten of the world oil consumer in 2006.
So what will happened to the oil price in 2008? Will it reach $100 a barrel due to higher demand and lower supply? Or it will go down due to price bubble? From the side of demand and supply, the price currently does not represents the situation. It is mainly affected by speculation on geopolitical risks in oil producer's country. Regarding geopolitical condition which is hard to predict, I think oil price in 2008 will average around $90-$110 per barrel.

Global stock market outlook in 2008

The global stock market in 2007 faces many problems, from the US sub-prime mortgage crisis to the oil price hike. It brings fear to investors all around the world. Many people worry that US economy is heading into recession. What will happen to the global stock market in 2008? Is it over for the US credit crisis?
The worst is yet to come. There will be plenty of asset write-downs in the first quarter of 2008. There will also possibility of rising inflation due to oil price and lower consumer spending in US. The consumer spending is a lagged variable. It will probably reach its bottom at the first six month of 2008. I think there will be a recovery in the next six if the Federal Reserve acts correctly. The Federal Reserve board of governors is inexperienced, according to BCA Research. Donald Kohn is the only one who has the experience with financial crises. The last Fed cut in December shows this inexperience. US market will certainly affect other stock market around the world. Emerging market led by BRIC (Brazil, Russia, India, and China) will still growing high in 2008.