Morgan Stanley surely is not convinced for Crude to be falling off due to global glut; Bullish Dollar might be a case here for another leg lower.
MONDAY: In a note presented by Morgan Stanley, that too included head of energy commodity research, Adam Longson, it highlighted TRADERS for accusing current commodity shrinkage on market necessities; crude in special consideration to that. Morgan believes it’s because of rising Dollar value in that had distressed entire market since last few months. As per their claims, Dollar-dominated commodities will be affected in future as well due to Chinese devaluation of Yuan (15% devaluation of Yuan could boost the trade-weighted dollar by 3.2% that might yield bearish crude with US$ 2.0/barrel to US$ 5.0/barrel i.e. 6% to 15%) and Federal Reserves’ decision to remain in a firm form. Surely, deteriorating fundamentals would be least affective currently when Crude is in over-supply on market platform:
“Oversupply may have pushed oil prices under US$ 60, but the difference between US$ 35 oil and US$ 55 oil is primarily the U.S. dollar in our view. That’s because there is no intrinsic value for crude oil in an oversupplied market.”
On a similar notice, Bank of America Merrill Lynch analysts had also stated the crude costs to plunge below US$ 30 – Dollar again is the reason stated behind. Not to mention, the analysts had lowered their predictions for this year over an average cost of U.S benchmark with US$ 45/barrel from US$ 48 earlier. As for Brent, they cut their call to US$ 46 from US$ 50.
According to MarketWatch: Oil futures last week tumbled to their lowest levels in more than a decade, extending a selloff that has seen West Texas Intermediate crude (CLG6), -1.36% the U.S. benchmark, and Brent (LCOG6), -1.70% the global benchmark, bearish with around 70% from their mid-2014 bullish hikes.
