Categories: world

Why oil is still underpriced

The oil price is seen in the past week, jerking higher through tensions in the Middle East but was dragged by the fear of the fallout from the trade war between the US and China. In fact, catches are fixed between the two forces and will probably bounce back in the near future based on which factor seems to exert greater influence on the market. Oil saw upward pressure in recent days, as the US government seems to be rushing into another war in the Middle East. National Security Adviser John Bolton seems to be dead in an attempt to escalate the conflict with Iran, despite the fact that tensions that have occurred rapidly over the past two weeks, officials of Bolton's National Security Council originally rejected the need to elaborate the de-escalation options "CNN reported, a clear sign of Bolton's intentions But President Trump seems to try to push the brakes, even though he largely agrees with the "high-pressure campaign" in Iran. He told the Pentagon he did not want a war. away from infinite wars in the Middle East, yet, after pushing the United States to the brink of conflict, calling tensions, especially with Bolton and Prime Minister Mike Pompeo, still driving the show, cannot be so easy. Trump's decision to withdraw from the nuclear power agreement last year followed by sanctions against Iranian oil, sanctions against export of Iranian metals and later sends shipping vessels to the Persian Gulf &#821 1; all movements are calculated to list…

The oil price is seen in the past week, jerking higher through tensions in the Middle East but was dragged by the fear of the fallout from the trade war between the US and China. In fact, catches are fixed between the two forces and will probably bounce back in the near future based on which factor seems to exert greater influence on the market.

Oil saw upward pressure in recent days, as the US government seems to be rushing into another war in the Middle East. National Security Adviser John Bolton seems to be dead in an attempt to escalate the conflict with Iran, despite the fact that tensions that have occurred rapidly over the past two weeks, officials of Bolton’s National Security Council originally rejected the need to elaborate the de-escalation options “CNN reported, a clear sign of Bolton’s intentions

But President Trump seems to try to push the brakes, even though he largely agrees with the “high-pressure campaign” in Iran. He told the Pentagon he did not want a war. away from infinite wars in the Middle East, yet, after pushing the United States to the brink of conflict, calling tensions, especially with Bolton and Prime Minister Mike Pompeo, still driving the show, cannot be so easy.

Trump’s decision to withdraw from the nuclear power agreement last year followed by sanctions against Iranian oil, sanctions against export of Iranian metals and later sends shipping vessels to the Persian Gulf &#821

1; all movements are calculated to list the pressure and undoubtedly to provoke Iran to react. The danger is that somebody will miscalculate.

In fact, the Wall Street Journal reported on May 16: “Intelligence gathered by the US government shows that Iran’s leaders believe the US is planning to attack them, leading to Tehran preparing for any counter-attacks.” The move of Iran has since been quoted by US officials as evidence of an imminent threat from Iran. In short, the Trump administration plays a dangerous game. Any false or incorrect interpretation can theoretically lead to the outbreak of war. Related: A value game too good to ignore

The good news is that Trump seems to want to escalate. Trump met the Swiss president on Thursday, which many see as an attempt to skip negotiations with Iran. The Swiss have acted as an intermediary between the two sides of the past. Trump also said on twitter on May 15: “I’m sure Iran will want to talk soon.”

Against this disturbing background, oil prices dampened serious concerns over the global economy, with Brent rising back to $ 72 a barrel over the past week. The market is still “under-priced by Iran risks,” according to Bank of America Merrill Lynch.

At the same time, the Brent Futures curve is in a rather steep reverse – where contracts in the future are traded at a premium for longer dated futures. This suggests that the market is tight, at least for the moment.

At the same time, oil faces enormous disadvantages with the trade events between the United States and China. The fact is that demand was already lost at the latest tax round. “[G] Ongoing oil demand has declined sharply in recent months, with average growth of just 680kb / d over the last two quarters compared to the 1.46m b / d trendy demand over the past 5 years,” wrote Bank of America Merrill Lynch in a note to customers. Weaker manufacturing operations in the US, China and Germany have been translated into weak distillate needs, the bank noted.

The trade war could make matters worse. Tariffs have affected “some pockets in the global economy,” Bank of America said, but the recent rise could begin to trickle into more and more consumers. As banknotes, models based on the US Treasury yield curve show that there is a chance for a US recession over the next 12 months, but there is disagreement about how important this metric is. Related: No, the oil glare has not neglected

The negative risk of crude oil is magnified by the fact that speculators have purchased a large amount of oil positions that can exert influence over short-term prices. “[T] here is a risk that much of the speculative society will settle for overthrowing its positions if the chances of a US recession increase again,” Bank of America warned.

The crude oil price path is very much dependent on what happens with the trade war between the US and China. “In our opinion, the global business cycle is at a key crossing. Weakness in manufacturing can slow down services if trade war ultimately damages consumer sentiment. In a global downturn, Brent can slip to $ 50 / bbl,” says Bank of America analyst. Page, in a US-China scenario, business confidence can return with a vengeance, resulting in a weaker USD and stronger global growth. If a upturn in global demand coincides with an IMO2020 boost, Brent crude oil may nail to $ 90 / bbl. “

In short, the oil market is” pricing the forthcoming tail risks, “Bank of America says.

Bob McNally, chairman of the Rapidan Energy Group, expressed it more in a statement to Axios.” The oil market has rarely seen so much two-way risk. China, trade and macroeconomic weakness can send crude prices at least $ 15 lower and intensifying geopolitical disturbance risks in the Middle East and Venezuela could drive them higher with the same amount, he says.

By Nick Cunningham from Oilprice.com [19659002] More Top Reads From Oilprice.com:

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