Head of Commodity Strategy
Summary: Crude oil markets are jittery and difficult to forecast, and it all comes down to the uncertainties surrounding the ultimate impact of the US sanctions levied against Iran.
The reason for this uncertainty can be highlighted in one chart: Iran’s oil production. At this point we just simply don’t know the full impact of US sanctions on Iran’s ability to produce, let alone export crude oil.
Forecasts range from anywhere from a loss of 500,000 barrels/day all the way to 2 million b/d. The latter forecast, which helped drive crude oil higher on Monday, was given by one of the world’s biggest oil traders on that day in Singapore.
The increased tax from higher oil prices on the global consumer is unlikely to become a theme until 2019. There is no doubt, however, that given the current dollar strength some emerging market countries are already seeing oil prices in local currencies getting close to 2011-14 levels.
The technical and fundamental outlooks both point to higher prices in the short term with Energy Aspects forecasting in an interview with Bloomberg that Q4 could be the tightest quarter for the demand-supply balance in more than decade.
With Brent having shown little or no interest in challenging the breakout level at $80.50/b, we continue to feel comfortable with our Trade Idea from Monday to be long Brent crude oil.
It will be very interesting the see the next COT report due Friday after the close (see COT updates on my twitter account Sunday @ole_s_hansen).
It will cover the week to September 25 and show to what extend hedge funds added long positions on the break above $80.50/b.
The latest oil market updates
Oil gains 1% ahead of shortfall in Iran supply (Reuters)
Oil Brief for September 27, 2018 (Bloomberg)
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
