Head of Commodity Strategy
Summary: Crude trades up on the day but unchanged on the week ahead of the weekly stock report from the U.S. Energy Information Administration.
WTI crude oil has bounced on renewed trade optimism ahead of the 'Weekly Petroleum Status Report' from the U.S. Energy Information Administration. At $53.50/b the price of CLX9 is more or less unchanged from where it was this time last week. During this time the deteriorating outlook for a trade deal between the U.S. and China helped drive the price to a low $51/b. Thereby almost eclipsing the August low at $50.50/b.
However the unexpected news that China may be open to a partial deal has helped put some optimism back into not only oil but also other commodities such as soybeans. Turkish troop movements on the Syrian border are likely to further have reduced the selling appetite.
In our monthly commodity deep dive held earlier today - replay available Thursday - we highlighted the reasons why we believe that the downside risk, despite economic angst, looks limited from here. The geo-political risk premium following the September attack in Saudi Arabia has been removed but there are still several reasons why it could suddenly re-emerge. So while the pendulum continues to swing between demand and supply worries we suspect that WTI and Brent will stay range bound around $55/b and $60/b respectively.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
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