Displaying items by tag: Iran
Oil is Surging to New Highs
(Houston)
The oil market is continuing to thrive and the near-term outlook is strong. WTI oil, the US benchmark is currently trading at over $72 per barrel, while Brent, the world’s benchmark is at $80. The commodity is moving higher as markets are worried it will not be easy for producers to easily offset the losses of production in Venezuela and Iran, meaning supply may be constrained. OPEC generally agrees that when oil gets to $80 or above, it crimps demand.
FINSUM: The near term outlook for oil looks strong because of renewed US sanctions on Iran. However, in the longer term, the trade war seems likely to take a toll on emerging market economies, which will send oil demand and prices sagging.
Oil Investors Need to Worry about a Trade War
(Houston)
Many investors are simply unfazed by the current trade war erupting between the US and China (just look at share prices for evidence). However, even those who may be bullish on equities need to be worried for oil. While the increasing sanctions on Iran are supportive of prices, a trade war would likely be very bad. The reason why is that increasing tariffs would likely cause an economic downturn in emerging markets, which would then heavily sap oil demand, leading prices lower.
FINSUM: The oil and other commodity markets are demand-driven (and realistic) in a way that stocks aren’t. Watch them for where the economy is actually headed.
Citi Says Oil is Headed for $80
(Houston)
Oil has been in a bear market for about three years. While it has not been consistent and there have been ups and downs, oil prices have been mostly stuck, plagued by oversupply. However, Citi thinks that paradigm is about to disappear, with prices rising to $80 per barrel. Citi says a host of geopolitical risks, including sanctions on Iran, broader Middle East tensions, and North Korea are three issues which will send prices higher.
FINSUM: We aren’t big fans of this prediction. Not so much because we don’t think oil could move higher, but because forecasting political risks is a hopeless exercise. Here is a different view: the OPEC agreement falls apart because the only producer it is helping is the US (which is not in OPEC), sending prices much lower.