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Commodities: How low can oil go?

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You need only take a look at the energy sector to see what a mixed bag it’s been this week for commodities. Gasoline reached its highest level since July due to reduced supplies following refinery outages in Canada and the Gulf of Mexico. Meanwhile both WTI and Brent have fallen this week due to ample supply. But Saxo’s Ole Hansen notes that the potential threat from Islamic state (IS) continues to keep the market on the nervous side. His trade tip is to buy WTI down towards USD 90 a barrel.

It’s the threat of Ebola spreading within West Africa, that’s spiked the price of cocoa which has risen 10% in two weeks. Hansen says with harvest approaching there are concerns the disease will have a negative effect on the crop. But he says that these fears aren’t warranted because there is plenty of supply. The market, however, is driven by fear which means it could go anywhere, he adds.

Gold is also up this week and that’s down to lower stock markets and bond yields. The geo-political situation in Iraq and Syria has also added some support to the market. Hansen notes that the market is short at the moment so near term the risk is for a move to the upside. His trade tip is to buy gold for a bounce to 1250 USD/oz.