Head of Commodity Strategy
Brent crude oil has been struggling to break above $80/b despite a deteriorating outlook for production in Venezuela and the not yet quantifiable impact of US sanctions on Iran.
Reasons:
A ten-dollar rally since early April could indicate that tighter supply may begin to be priced in.
Opec and Russia may consider easing their production cuts before, or no later than at, their joint meeting on June 23: Argus Media yesterday reported that Saudi Arabia, Russia and the president of Opec are likely to meet this week to discuss a controlled relaxation of the over-compliance caused by the continued slump in Venezuelan production.
The US may struggle to achieve the desired impact on Iranian oil exports given the lack of support from other members of the 2015 nuclear deal
During the past week, instead of triggering additional momentum buying above $80/b, sellers emerged to knock it straight back below. Geopolitical risks are likely to keep a relatively solid floor under the market. But the recent price behaviour could indicate the market is getting ready to consolidate with $77.50/b being the first level of support.
Watch what people do, not what they say: Hedge funds have been net-sellers of crude oil for the past four weeks with the net-long dropping to a five-month low:
Focus today is on the weekly EIA report at 14:30 GMT. Crude stocks are surveyed to have dropped by 2m barrels last week. Gasoline, meanwhile, trades lower as a record fund long reacted negatively to the surprise counter-seasonal rise reported by the API last night.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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