1231 Tuesday 18 December 2018

The global marketplace is just about as complicated as it has been in recent memory. Sure, we’ve seen news stories come and go that have an impact on the trading floor, but now the market is flooded with different headlines that when combined, have left even seasoned investors in a state of confusion.

The ongoing Trump/Xi trade wars have been ever present, Brexit is the story that never goes away, European political issues including the Italian budget and the gilet jaunes movement in France aren’t going anywhere and you can add the air of uncertainty over recent Saudi Arabian and Russian stories, it’s no wonder that things are complicated. But oh, I forgot to add the oil market to the equation.

Historically, oil has been one of the most sought after commodities in the world and is tracked by traders for indications of the state of the global economy, but things are changing and the world is moving on, kind of. Long gone are the days of $100 a barrel oil and a return to those levels is unforeseeable in today’s climate. On the subject of climate, the demand for oil is beginning to change as the world looks for more cleaner and sustainable sources of energy effecting both the way we drive and fly. Demand has also been cut as America transitioned from an oil importer to an oil producer, and this all is having a knock on effect on OPEC or OPEC+ if you include Russia.

A recent OPEC+ meeting in Vienna saw the newly formed group struggle to agree a deal on a propositioned cut in oil production before being salvaged at the last minute. But the final agreed cut of 1.2m barrels per day was not the only headline to come out of the meetings. Qatar announced its decision to end its 57 year membership of OPEC, with the reason speculated to be geo-political tensions, despite official statements to the to the contrary. The Middle East has never been plain sailing in terms of politics and recently Qatar has faced a regional economic boycott over their activities which may have attributed to their withdrawal. Nevertheless, the official line is that Qatar will now focus on natural gas for which it is one of the world’s largest producers. Further rifts within the OPEC+ world may yet be seen with much unrest being tied to Saudi Arabia’s relationships with the US and Russia.

All of the above have led to today’s eye opening headline that WTI Oil fell below $48 per barrel in today’s session, the lowest it’s been since October 2017. At the time of publication, futures in light sweet crude oil are at the $48.77 mark, a figure well below the 2016 and ‘17 closing prices of $53.72 and $60.42 respectively for crude, and while this is still above the 2015 low of $34.73, it does suggest that the oil market as we knew it is long gone.

Oil is a commodity that is often looked to by investors for portfolio diversity and if you would like to learn more about diversification options, call one of our brokers directly on 0121 454 0770 or enter your details below.

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