Market Overview

Here Is The Case For -- And Against -- Crude Oil


Oil continued its downward momentum on Tuesday and flirted even close to the $30 per barrel mark.

The Financial Times interviewed 2 market experts, one bull and one bear, and summarized their analysis in a new report.

The Bear Case

Ed Morse, global head of commodities research at Citigroup, told the Financial Times that it would take an "unusual series" of supply disruptions to reverse the ongoing selling momentum. He added that the short-term prospect for the commodity is "fairly bleak" as stockpiles continue to grow at a time when demand "remains sluggish."

Morse continued that among non-OPEC nations, production remains "robust" and continues to grow in Canada and Brazil while supply has only "scarcely" declined in the US.

Finally, Morse suggested that the energy sector "appears to be running out of storage capacity" and oil could fall as low as the $20 range.

The Bull Case

Taking the other side of the argument, Paul Horsnell, head of commodities research at Standard Chartered, suggested that oil is "not trading on the basis of any fundamentals."

Horsnell argued that there is a "very low buffer" of sustainable capacity and a "high level of unexpected supply outages." He also noted that the market "would be surprised by any significant supply interruption."

Finally, Horsnell suggested that China's demand for oil will once again exceed market's expectations - as it did in 2015 when the market was estimating a 2 percent demand growth but actual growth was above 6 percent.

Posted-In: Bear Case Oil Bull Case Oil China oil demandLong Ideas Short Ideas Commodities Markets Trading Ideas


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