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WTI hurt by oversupply – Heartwood Investment Management

FXStreet (London) - Jade Fu, Investment Manager at Heartwood Investment Management believes that West Texas Intermediate (WTI) oil has been hurt by ample supply.

Key Quotes

“The commodity has recently broken out of its tight trading range of the last two years and has fallen to around $91 a barrel.”

“Fundamentally, there appears to be no short-term upward price pressure in WTI; after all, the shale revolution has completely changed the oil trade picture in the US. In 2005, the US was importing 60% of its oil compared with 3% today.”

“However, as the WTI price approaches its deemed cost of production, the chance of a rebound gets higher, not to mention the potential of a spike up in price driven by unexpected geopolitical events. In the meantime, WTI’s futures curve shape means investors are getting paid a small convenience yield for holding the commodity.”

“Falling demand in China, as this economy transitions towards a more sustainable level of growth, is primarily driving a less compelling fundamental outlook for the commodity sector as a whole. Nonetheless, there is a high level of price dispersion across commodity indices that might offer opportunities for investors.”

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