© Filip Petersson
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With refineries in the maintenance, weak seasonal demand between heating and driving season, Saudi Arabia likely to continue to hold output high even if Strategic Petroleum Reserves are released. While Iranian negotiations about to resume and macro sentiment turning more bearish again, crude oil is definitely facing short term headwinds. However, demand continues to grow outside the OECD.There is a wide range of production issues and the full Iranian embargo is drawing closer. Therefore, we expect weakness to be temporary.
What oil price development do you expect this year?
Brent could dip towards $ 115 in the short term but we expect new 2012 highs to be printed before Q3 is over. Iran will be in the focus of attention on the supply side, but there are also several other issues of importance, namely Sudan, Syria, the North Sea and Nigeria to mention a few. On the demand side a soft or hard landing in China will be the big issue. Moreover, the risk for another downturn in Europe and/or the US should not be disregarded.
How oil prices is affecting world economies?
High oil prices have a dampening effect on economic growth. The impact is most pronounced in the US where fuel prices are affected more directly. Higher fuel tax levels in Europe and fixed product prices in China gives a lagging effect in these regions.
Are there any correlations between oil prices and the major currency pairs?
There are correlations, but they change over time. Naturally the Dollar is important for all commodity markets, since commodities are priced in Dollars.