Crude oil may stay in $78-85 range; see more momentum in Bitcoin: Peter McGuire

Peter McGuire on oil, gold & bitcoin

With crude oil prices oscillating between $78 and $82 per barrel and geopolitical tensions in West Asia escalating alongside disruption in the Red Sea, the oil market faces a complex landscape. Additionally, the slowdown in China adds a layer of uncertainty.

In an interview with Moneycontrol, Peter McGuire, CEO of XM Australia, said he won't be surprised to see prices rise in the short to medium term. He also believes that following the recent surge in Bitcoin's value, there is substantial momentum propelling its price higher. Edited excerpts:

Crude oil has been pretty much rangebound between $78 and $82 a barrel. Do you expect a breakout from these levels?

I anticipate an upward movement, driven by several factors. Firstly, the US dollar has faced significant pressure due to anticipated rate cuts in March. Geopolitical tensions remain high, with the potential for escalation. We're closely monitoring developments in Ukraine and Russia, along with other geopolitical concerns.

Overall, I believe there will be increased demand for crude, particularly in terms of the dollar. So, it wouldn't be surprising to see prices rise by a few dollars in the short to medium term.

What is the level you're penciling in? Would you say that we could make a dash to $90 or do you think that's a remote possibility?

The trajectory hinges on geopolitical developments and whether they escalate. It's been a sluggish start to the year, with prices mostly rangebound. However, there's a slight upward push lately. We saw a small surge followed by a retreat in recent weeks.

I anticipate a gradual climb, likely within the $78-85 range, possibly touching $90. The market is incredibly dynamic right now, presenting ample volatility for trading.

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Last year, we saw OPEC+ sticking to output cuts. Do you expect more cuts or do you think that's out of the way?

Aramco has adjusted its oil production plan, scaling it back from 13 million to 12 million barrels per day. This reflects Saudi Arabia's stance. They likely desire higher prices, which could be intriguing as we approach the end of the first quarter and into the second. These factors may influence OPEC's decisions. If OPEC aims for higher prices, we might see consistent production cuts, ultimately pushing prices upward.

US 10-year yields are elevated at about 4 percent. Will they take off some of the appeal of gold, which is considered a safe-haven asset?

Take note of the US dollar index, hovering just above 104, but it has been very rangebound. These fluctuations offer trading opportunities. Looking ahead, upcoming data releases and recent events, such as a major US bank's substantial price decline by 50 percent, require consideration. Factors like commercial real estate, debt, China's property market, and Bitcoin's surge above $48,000 are influential.

Furthermore, significant central bank buying, notably from India, remains a driving force. Investors may find these factors compelling, diversifying their portfolios with significant asset classes.

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Regarding equities, the anticipated Fed rate cuts are now postponed to the second half of the year. Are we bracing for a correction in equity markets?

The rise in equities has been remarkable. From a year ago to recent months, particularly in October, November, and December, we've witnessed extraordinary growth. Who could have predicted the S&P surpassing 5,000? Just a while back, it was at 4,500, with doubts about reaching 5,000. Yet, it surged rapidly.

Such swift ascents often precede pullbacks. We need to monitor factors like CPI, job numbers, the US dollar, geopolitical concerns, global consumption, and inflation. While there's been a slight retreat, the market remains high, with American consumer savings rates at historically low levels since 2007-2008.

Has the US tech rally peaked out?

Looking back at last year, the market surged from just over 10,000 to nearly 16,000, a remarkable 60 percent increase. Markets can become overextended on the upside. Recent poor numbers from Tesla highlight this. Monitoring quarterly performance and earnings releases will provide insight into consumption trends.

Currently, strong spending and consumption are evident, reflected in share prices, particularly among the top performers. However, the sustainability of this trend remains to be seen, especially considering outliers like Tesla. Continued observation will clarify whether we can expect stock pullbacks or further upside rallies.

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Within the emerging market pack, how is India looking to you?

I find India's progress truly remarkable. Recently, I attended a presentation with Prime Minister Modi, where the focus was on infrastructure development. Look at Mumbai – everywhere you see cranes, construction projects, and the use of base metals in various infrastructure projects like roads and tunnels. It's challenging to envision an endpoint because India's growth momentum appears strong and sustained over the long term.

Considering India's GDP trajectory, it's poised to become the world's third-largest economy soon, which is truly extraordinary. While India's market may seem rangebound at times, this is typical as markets tend to stabilise after rapid growth. The Indian market seems to be taking a momentary pause before it resumes its rapid advancement. Despite this, there's significant internal consumption, indicating a dynamic and vibrant economy.

Bitcoin has seen a meteoric rise in recent times. Between gold and Bitcoin, which asset class would you pick?

It's essential to consider both gold and Bitcoin. Gold has maintained its allure… you're talking about an asset class that's been around for millennia. On the other hand, Bitcoin, although relatively new compared to gold, presents an alternative to traditional currencies and operates independently of central banks. This uniqueness attracts global investors seeking to participate in the Bitcoin phenomenon.

With Bitcoin's remarkable rise from $16,000, it's evident that there's significant momentum driving its value upward. Bitcoin prices surged to $50,000 for the first time since 2021.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.