Appetite to risk boosted by higher oil prices, is $60 a short term target?

11 October, 2016

Most Asian stocks traded higher on Tuesday with a strong lead from U.S. equities, a weaker Yen, and higher oil prices. 

Russia’s willingness to join OPEC in stabilising prices pushed oil 3% higher on Monday, after President Vladimir Putin said that Russia, the world’s biggest oil producer, was ready to co-operate to limit oil production. Now with the market share war coming closer to an end, we can say that the worst for oil is behind us, but comments from Saudi’s Minister of Energy and Chairman of Aramco Khalid Al-Falih that prices could rise to $60 a barrel seems a bit optimistic at the current stage. 

Markets are already pricing in a potential deal to cut output, and prices have risen by more than 15% since OPEC members met in Algeria on September 28. I do believe that an official agreement will be reached when the cartel meets by the end of November, but the key questions to be asked thereafter are to what extent will they adhere to the new set quotas? What if the prisoner’s dilemma comes into play? How fast will Nigeria’s and Libya’s supplies return? And what does $50 a barrel mean to the shale oil industry?

Overall, I am optimistic that we’re getting closer to a rebalanced oil market, but as always markets do overreact to rumours which suggest that any upside should be limited from current levels.

The U.S. dollar resumed its Monday’s rally with the index back above 97 despite no data being released. However, traders seem more convinced that a December rate hike is coming with U.S. 10-year treasury yields climbing above 1.76% and CME’s FedWatch showing expectation for December rate hike standing at 70%.  Meanwhile the pound came under renewed pressures, extending its drop for the fourth straight session as traders continued to ignore the positive flow of economic data and focused on the price that U.K. has to pay for a hard Brexit.

In the commodity currencies space the Kiwi dropped by 1% to a 3-month low of 0.7062 as RBNZ’s John Mc Dermott made it bluntly clear that further monetary policy easing is on the way. Inflation remains to be the key indicator frightening central bankers and with New Zealand’s CPI just slightly above zero in third quarter, more should be done to reach the 1-3% inflation target.  


Source link  
More bad news for Sterling as EURGBP

Backlash - that would be the word used to sum up the investor reaction from the latest attempt by UK Prime Minister Theresa May to push forward her...

EURJPY sinks to flash crash levels

A wave of risk aversion engulfed global equity and foreign exchange markets on Thursday after Donald Trump accused China of breaking...

US corporate earnings to drive global stock markets

Asian stocks, excluding Japan, are mixed on Monday, even after US stocks posted new record highs following the United States GDP report released at...


Mixed US corporate earnings reaction

Asian equities fluctuated mostly into the red on Friday, following the trend seen in their US counterparts on Thursday. As the latest US corporate earnings...

Brexit stalemate deepens

The drama, confusion and sheer uncertainty over Brexit intensified yesterday evening, after British MPs rejected all eight options aimed at...

Brexit chaos deepens

The British Pound fell yesterday afternoon, after the House of Commons Speaker John Bercow essentially banned Theresa May's Brexit deal from getting a third vote.


Rand gains on GDP but outlook clouded

Buying sentiment towards Rand has unexpectedly brightened today after official reports showed South Africa's economic growth cooled during...

US-China trade deal, ECB meeting and NFP

Asian equity markets entered the trading week on a front foot, following news that the United States and China were close to a breakthrough deal that...

Fed patience adds to the Dollar woes

Will the Federal Reserve raise interest rates at all in 2019? This was a question even Fed officials were unable to answer, as the minutes from the FOMC’s January policy meeting revealed.

  


Share it on:   or