Oil Prices and the Cancellation of the Iran Deal

Gold is off a bit the past three days and the US Dollar is on a tear. One could make the argument that deep pockets have chosen a winner...
 
This was published on Axios today:

"Bank of America predicts that oil prices could spike to $100 a barrel next year, a price not seen since 2014, Bloomberg's Grant Smith reports.

Driving the assessment: The economic crisis in Venezuela has created oil supply problems, and President Trump's decision to withdraw the U.S. from the Iran nuclear deal and reimpose sanctions on the country have sent crude prices soaring. Meanwhile, world inventories are expected to shrink while demand has been on the rise.

  • Exacerbating it: OPEC has also been working with Russia on output limits, although those limits may not have staying power given Trump's Iran deal announcement, per Nasdaq.
Temper the assessment: Bank of America is the first Wall Street bank to make this prediction, and other banks haven't floated numbers this high. According to Smith, Goldman Sachs predicts Brent crude will hit $82.50 a barrel in the coming months, but sees prices subsiding in 2019."
 
bone said:
This was published on Axios today:

"Bank of America predicts that oil prices could spike to $100 a barrel next year, a price not seen since 2014, Bloomberg's Grant Smith reports.

Driving the assessment: The economic crisis in Venezuela has created oil supply problems, and President Trump's decision to withdraw the U.S. from the Iran nuclear deal and reimpose sanctions on the country have sent crude prices soaring. Meanwhile, world inventories are expected to shrink while demand has been on the rise.

  • Exacerbating it: OPEC has also been working with Russia on output limits, although those limits may not have staying power given Trump's Iran deal announcement, per Nasdaq.
Temper the assessment: Bank of America is the first Wall Street bank to make this prediction, and other banks haven't floated numbers this high. According to Smith, Goldman Sachs predicts Brent crude will hit $82.50 a barrel in the coming months, but sees prices subsiding in 2019."
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I've maintained that Brent will hit $85 this year and $100 next year. The market is so tight right now. It's almost scary how tight it is. Remember, the last time we saw geopolitical issues in 2012 and 2013 we were drowning in supply and we still had a $100 handle on oil.
 
bone said:
Gold is off a bit the past three days and the US Dollar is on a tear. One could make the argument that deep pockets have chosen a winner...
More...
CAD is on more of a tear. EUR/Cad is more volatile right now. Europe is more vulnerable to higher oil prices, while higher prices could benefit USD. Eventually demand destruction shows up, but certain segments of the US economy are about to wake up. Fracking, anyone?
 
Cswim63 said:
CAD is on more of a tear. EUR/Cad is more volatile right now. Europe is more vulnerable to higher oil prices, while higher prices could benefit USD. Eventually demand destruction shows up, but certain segments of the US economy are about to wake up. Fracking, anyone?
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Well stated.
 
Cswim63 said:
CAD is on more of a tear. EUR/Cad is more volatile right now. Europe is more vulnerable to higher oil prices, while higher prices could benefit USD. Eventually demand destruction shows up, but certain segments of the US economy are about to wake up. Fracking, anyone?
More...

Demand destruction takes a lot more time than people think. Cars are a lot more fuel efficient than they were 10 years ago. Most of the demand is coming from emerging market economies that have much higher growth rates than the US.
 
Cswim63 said:
Ok. So less demand destruction. More inflation?
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Yes, eventually inflation kills all bull markets. But we barely have any at the moment. We still need to get back to our historical avg. Eventually higher oil prices work their way into input costs and squeeze operating margins. This is a slow process and will take longer because supply chain logistics has gotten very efficient. We're probably a few years out before this becomes a concern.
 
Perhaps some of the second tier and lower oil service companies just got a reprieve. I was doing a pickup two years ago in an oil town in East Texas and you could see emptiness and inactivity. Which is hard, because usually you don't see what you don't see.
 
Maverick74 said:
Yes, eventually inflation kills all bull markets. But we barely have any at the moment. We still need to get back to our historical avg. Eventually higher oil prices work their way into input costs and squeeze operating margins. This is a slow process and will take longer because supply chain logistics has gotten very efficient. We're probably a few years out before this becomes a concern.
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Hey Mav....
This morning on Bloomberg "Commodities Edge" they said that the Venezuelan elections on 5/20 will have a greater influence on the world's oil markets than Iran. Is this true?
 
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