Page 23 - Investment Outlook

Oil
Saudi Arabia announced that they would cut production over the next month to the lowest level in 18 years to provide some stability to oil prices. Additionally, investors calculated that even with these cuts there will likely be a large amount of oversupply given the depressed demand caused by the coronavirus. WTI now stands at US$29.52pb and Brent Crude is priced at US$32.50pb as of late-May. This is the lowest price range for oil since 2016.
We expect Chinese demand will be crucial for
oil producers coming out of this crisis. China’s incredible rise is one of the main reasons why oil was on a secular uptrend for nearly the last two decades. Of course, as the global economy emerges slowly from lockdown, fuel consumption in both cars and aeroplanes should pick-up again. Some of this near- term recovery in demand is likely already reflected
in oil prices. In the medium term, it is unlikely
that oil prices will be as high as we have become used to over the last few years, but stability in the US$30-US$50pb region would not be unexpected. Even though current oil prices look low by recent standards, they are quite typical by historical standards. Periods of low oil prices may cause some short-term trouble, but they have almost always boosted the global economy later down the line.
Large crude
oil tankers
have now been commissioned to store rather than ship oil.
Financial Advice & Wealth Management
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