Saxo Morning Call

Trump exits Iran deal, oil moves into $70-80/b range

Michael McKenna
Head of Editorial Content, Saxo Bank

US president Donald Trump has withdrawn the US from the 2015 nuclear deal with Iran, stating that Washington will deploy the "highest level" of sanctions against the Islamic Republic with companies being given 180 days to scale back trade with Iran.

"Trump's decision moves us away from the previous $60-70/barrel range in crude oil, and into a new $70-80/b range," says Saxo Bank head of commodity strategy Ole Hansen, who adds that Tuesday's American Petroleum Institute report showed major declines in oil and refined product inventories, adding to the bullish theme animating the crude oil trade.

"If we see a similar situation in today's Energy Information Administration release, expect the theme to extend," Hansen notes.

With the 2018 midterm elections coming up in November, any pronounced rise in petrol prices would be negatively received by voters; Trump has said that the US has talked to other producer nations about this issue. The estimated supply drop from Q3 onwards stands at 200,000-700,000 barrels/day, with Europe hardest hit as it currently imports 500,000 b/d from Iran.

Contagion across asset classes was limited in the immediate wake of the Iranian decision, but Saxo Bank head of forex strategy John Hardy reports that the bullish dollar trend remains very much in effect as the US two-year yield pushes to cycle highs.

"We have also seen Japanese earnings rise at their fastest pace in 20 years at 2.1% year-on-year," says Hardy, but the dollar remains firm against the yen with USDJPY bouncing from support late Tuesday to the 109.60 area.

In stocks, Saxo Bank head of equity strategy Peter Garnry says that the weakening of the euro versus USD has resulted in a massive bid for European shares with the STOXX 600 index likely to push 10 points higher to over 400.

"This is not a situation that is friendly to shorts," concludes Saxo's equities head, adding that the bounce appears highly linked to EUR weakness given the relatively soft performance of European earnings (3% revenue growth and 4% earnings-per-share growth, y/y) versus their US counterparts (8.3% and 24%, y/y).

Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.