Crude oil strengthens on expectation over OPEC deal extension; geopolitical tension looms large
We expect Nymex Crude prices to stay firm. The upcoming OPEC and non-OPEC meeting will carefully monitor the situation in order to provide market stability
Jun 23, 2019 / 07:44 AM IST
Last week, most of the commodities ended in the green. Gold prices rose 4 percent with Comex Gold making new highs of the year at $1,414 per oz while Comex Silver prices rallied 3 percent after the US Fed kept its interest rates steady, but signalled a rate cut in the July 19.
Base metal prices gained support from the weakness in the dollar and after US and China agreed to meet at the G-20 meeting next week. All the metals, except zinc ended with almost 2 percent in gains last week. Nymex Crude rose by 9 percent on account of geopolitical tensions between Iran and US and on expectation of Organization of the Petroleum Exporting Countries (OPEC) deal extension.
Nymex natural gas, an exception, closed with 7 percent losses on higher stockpiles and poor seasonal outlook.
Crude oil prices reversed its losses last week due to rising geopolitical tensions after Iran shot down a US drone and a drawdown in crude stockpiles added to the gains. Also, looking from global demand supply perspective, currently the market is in a deficit of 0.75 mbpd and we predict the deficit to remain until the third quarter of 2019 if the OPEC continues with the oil production curbs.
Going forward, if Iran's oil production and exports stays lower for longer, we might see more geopolitical concerns to arise in future after Iran has threatened to block the Strait of Hormuz in retaliation over US and Europe sanctions.
We expect Nymex Crude prices to stay firm. The trade tariffs and economic growth slowdown has affected the global oil demand. The upcoming OPEC and non-OPEC meetings will carefully monitor the situation in order to provide market stability.
Also, with the supportive US Fed economic policy announcement, and the US and China set to resume trade talks soon provide some hope for the economic growth.
We expect Nymex Crude prices to trade higher towards $65 per barrel in the coming quarter of 2019. Currently Nymex Crude prices are trading at $57 per barrel.
The author is Commodity Analyst at Narnolia Financial Advisors.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.