Oil: Markets to pursue recovery - TDS

Analysts at TD Securities are more optimistic on our outlook for crude this year, as they expect OPEC to remain committed towards balancing the market, that Chinese policymakers are nearing the pain threshold required to trigger the stimulus necessary to fire up their economic engines, while the rate of deterioration in global commodity demand has already peaked.

Key Quotes

“Firstly, we think that OPEC will remain committed towards its objective of rebalancing the market. We expect that the current OPEC+ agreement will lead to a slight deficit in 1H19, even after accounting for an aggressive hit to emerging market demand.”

“Secondly, we anticipate that Chinese policymakers will stimulate, which in turn would boost Asian commodity demand growth. The rate of deterioration in global commodity demand has already peaked, which suggests upside in commodity demand momentum in the coming months.”

“Ultimately, we see a balance of risks tilted towards higher prices for energy markets, as current prices reflect fear rather than fundamentals. This suggests that WTI could reach $55-60/bbl and Brent towards $65-70/bbl in the coming months”