Crude to be in $95-120 range for some months: Rabobank

Adrian Foster, head Financial Research, Rabobank, says that a big jump in crude prices is negative for the momentum of Indian economy. There are many speculative funds working globally which have a big swing at oil in the last couple of months, and with the fears around Europe, slower growth in China, India and ongoing lackluster growth in the US. I think there have been some sizeable shorts in that market. I expect the crude to be in the range of USD 95-120 for the next couple of months.

Below is the edited transcript of his interview to CNBC-TV18. Q: How will a big jump in crude prices affect investments towards India?
A: It is definitely a negative for the momentum of Indian economy. We saw the Indian economy lost some momentum in the last couple of quarters.
There are many speculative funds working globally which have a big swing at oil in the last couple of months, and with the fears around Europe, slower growth in China, India and ongoing lackluster growth in the US. I think there have been some sizeable shorts in that market.
In the last two months the fears in Europe has not really pan out. Recently, there has been some path of maximum paying. In the oil market some of the shorts have been burned out.
I think the fundamental demand picture, though not positive but is not negative either. Some people have emphasized, that is why we are seeing this renewed rally in the oil price. I think generally oil and commodity prices will be elevated or stable in the next couple of months and I think this will increase challenge for Indian policy makers.
They need to kick that market by making more attractive for FDI that would support the currency and would give the domestic economy a bit of leg up in terms of economic momentum. Q: What's your range of stable to elevate for crude prices? What is the range that you are considering at the moment considering QE3 is not looking eminent?
A: I expect the crude to be in the range of USD 95-120 for the next couple of months. Q: What is your view of cash will move in the next 3-6 months, will it be deployed in the equity markets or will it be removed from the equity markets given the uncertainty?
A: In the last one-two years investors have become a bit jaded. I think the factor of uncertainty which will stay with markets through out this year as Europe will continue to simmer through this year and in the next year. I think that saw downside risks coming to the front of the markets radar. Many people tend to over state those downside risks.
Periodically, we will see selloffs, but I think there are some good opportunities at those times. We have seen incredible weakness in European equity markets since June 1. There are opportunities, one need to be bold enough to go for them.  Q: In the European equities, notably the DAX had a decent rally has it run ahead of itself? Is there any lurking event like bond redemption or political event that can lead to brinkmanship yet again? Is the market crying out to be sold or will it have more legs?
A: I don't have a strong downside view in the near term. We periodical see the escalations of threats in Europe and then some bandage solution which tend to calm for a while.
The recent announcements which cause the Spanish Bank rescue by passing the Spanish government have given optimism to the market. That has got a bit of further run. The 11% gain in the euro stocks 50 should be seeing in the context the sizeable falls we are seeing in the preceding couple of months. This 11% rise does not suggest right optimism to me. Q: What is the kind of absolute upside we could expect in the US markets from here to year end?
A: The US economy has lost bit of momentum in the last couple of months, a 2% growth momentum through this year. In the last couple of months we have seen economy growing a little bit slower than that. One fundamental factor I like is the pick up in home sales which reinforces in my mind that there is some positive momentum in the economy.
The weak patch of the Q2 has flowed into the Q3, the Q4 looks bit stronger which will give support to the US equities markets.  because of the liquidity backdrop remains generous and I see very limited prospects of the US Fed moving away from its ultra easy policy selling off late. I think some support will come through for that market as we get close to the fourth quarter this year.