Tightening supply is pushing oil prices higher. The USA has sanctioned Iranian crude exports, while at home capacity constraints and pipeline bottlenecks are tightening, and inventories have hit their lowest level since 2015. This, despite US crude production reaching an all-time high June. OPEC and exporting countries such as Russia are discussing raising output to counter the falling supply from Iran, but raising 1.3 million extra barrels per day is not easy. Saudi Arabia and Russia recently decided against additional production increases.
They are defying US President Trump’s demands for lower prices. Oil-sensitive currencies have firmed as OPEC resists an output rise and Brent crude climbs through $80.66. Traders are forecasting $90 per barrel by years end and $100 by early 2019. We continue to see Brent outperform WTI yet rise, as commodity curves are increasingly bullish. Which in turn will support US energy companies earning outlook. Higher crude oil prices will have a negative effect on consumer discretionary as household spending slows.
By Peter Rosenstreich