Commodity Detector – Oil prices: Rising geopolitical risks ~ Daewoo says

9:20 PM | January 4, 2016 Sektoral No Comments
  • On the final week of 2015, WTI crude fell 2.8% and Brent crude declined 1.6%.
  • With continued oversupply limiting oil’s rebound ahead of the resumption of Iranian oil production, US oil inventory unexpectedly increased 2.6mn bbl (forecast: -1mn bbl), causing oil prices to slide.
  • However, oil prices stayed above USD36/bbl as heating fuel consumption outlook improved after the winter temperature fell to normal levels in the US.
  • From a short-term perspective, geopolitical risks are rising in the Middle East. Saudi Arabia cut diplomatic ties with Iran due to Iran’s execution an outspoken Shiite cleric. With tensions between two oil producers intensifying, we need to keep tabs on its impact on oil prices. If the conflict spills over further into the Middle East, oil prices could rebound on the back of greater risk premium.
  • Gold and silver prices continued to move in the opposite direction with the US dollar. Gold and silver prices fell last week, while the US dollar index rose by 0.7%. – The US rate hike and expectations for US dollar appreciation steadily weighed on a pickup in global and silver prices. In particular, silver displayed high volatility, ending 2015 at less than US$14/oz.
  • The directions of gold and silver prices in earlyJanuary should hinge on the movements of the US dollar after the announcements of US job market data and major countries’ manufacturing data.

(Daewoo Securities) Commodity Detector-Oil prices Rising geopolitical risks.pdf