Saxo Bank: Oil may go down in value in early 2018
Baku, Azerbaijan, Jan. 22
By Anvar Mammadov – Trend:
Commodities in general are benefiting from an increased focus on inflation as the current expansion cycle moves toward its late stage, where price pressures tend to build, Head of Commodity Strategy at Saxo Bank Ole Hansen told Trend.
“With OPEC and Russia having promised to keep production capped, the three key questions that are likely to determine the price of oil in 2018 are the production response to higher prices (not least from US shale oil producers), the potential from new supply disruptions, and the continued strength of the global economy,” said Hansen.
“Barring any geopolitical upsets, the record 1 billion barrel oil long held by funds at the beginning of 2018 could pose a potential challenge to the current bullish momentum,” he noted. “Given the impact on the price of oil of a few hundred thousand barrels per day in changed supply or demand, we see the risk – especially during the coming months – skewed to lower prices, with Brent crude oil at risk of returning to $60 per barrel.”
“After almost hitting our year-end target of $1,325 per ounce last year we maintain a bullish outlook for gold into the early stages of 2018. The dovish December 13 Federal Open Market Committee rate hike and the US tax reform agreement both helped signal another low point for gold with inflation once again emerging as a key driver for gold support,” noted the expert.
“Our trade idea for Q1 is to be long gold against WTI crude oil - we favour using WTI over Brent given the lower cost of holding a short position in WTI,” said Hansen.
The price for March futures of the North Sea Brent oil mix increased by 0.22 percent and stood at $68.76 per barrel, while the price for March futures of West Texas Intermediate (WTI) oil increased by 0.11 percent and amounted to $63.38 per barrel as of 10:40 on Jan. 22.