Commodities & Currencies

(Houston)

The oil market is in an odd place right now. Generally described as “tight”—when supply and demand are very close, prices have risen considerably over the last several months. That said, prices have fallen steeply over the last week or so on fears of falling demand and rising supply. That is what makes today’s call on oil so bold. Barron’s, citing a senior research analyst on the oil market, says that prices may rise from their current high $60s range all the way to more than $100 this year. The core of the argument is that supply increases are not enough to offset growing global demand.


FINSUM: We don’t see oil going that high, but it could resume its bullish run. The core idea for us is that the oil market has many ways to increase supply (e.g. using strategic oil reserves, loosening sanctions etc), so we don’t see prices rising that sharply.

(Houston)

The commodities market is taking a wallop across the board today. It seemed to start earlier this week with oil dropping on fears over weakening Chinese GDP. Weaker growth would mean less demand for oil. Now, those fears have spread across most of the commodities market, with metals currently selling off strongly on the same fears. The renewed selling follows losses nearing 20% in industrial metals over the last month.


FINSUM: Remember that commodities markets are often a leading recession indicator, so this data does not bode well. Though in this case, it seems to be GDP data leading commodities, which is a bit back-to-front.

(Houston)

The oil market is continuing to experience some deep tremors after a great year. The oil benchmark dropped another 1% yesterday, bringing prices down to their lowest level in three months. After months of rising on concerns of weak output, the market is plunging on the threat of oversupply, especially from Russia and OPEC countries. Additionally, the IEA put out a report saying it saw global oil demand falling, another factor which weighed on the market. In addition to worries about rising supply and weakening Chinese GDP, Commerzbank commented that “The unexpected increase in U.S. crude oil stocks by 629,000 barrels reported by the API is generating headwind, as is a sharp rise in Russian oil production”.


FINSUM: It is starting to feel like the tide might really be turning on the oil market, which has had a great 18 months.

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