We are going to see softness across energy sector which is being demonstrated over the last week and it will probably continue on the downside, said Peter McGuire, CEO, XM Australia, in an interview with ETNOW.
Edited excerpts:
Crude is down because of a demand-led slowdown fear. It is at $61 level. What do you think is going to really come out of Trumps tariff tantrums because most brokerages believe that if indeed Trump were to slap tariffs on China we could be headed in for a recession?
There are so many different components to this whole equation and so much of an unknown territory. This is never seen before — the likes of China and US are at each others throats. So there is no doubt you are going to see softness across energy sector which is being demonstrated over the last matter of a week and that will probably continue on the downside.
Equity markets will watch out and it just depends on how ferocious President Trump wants to be and that was demonstrated in the last couple of days as far as Mexico is concerned. So, we are going to see some very interesting tell tale signs, new views on global economies within the next few weeks.
Is the selling in crude market largely due to unwinding of hedge funds or is this a clear indication of the future? OPEC has not cut production, US has removed or has imposed sanctions against Iran and if crude is coming down, then there is outright fear that demand will slowdown rather prominently?
As far as trades are concerned, we are very conscious that the hedge funds really ramped up and profited very nicely over the first three to four months of this year following the big leg up on crude since January 1. And that was very evident in the markets which became exhausted and other opportunities presented themselves.
The unwinding of those positions is certainly from the fear aspect. I am sure that the large hedge funds are saying there is too much uncertainty here, let us cut the long positions. They have probably been trading far more aggressively on the downside and that has been demonstrated in the last matter of a week and the big selloff that we have seen and continue to see in todays Asian trade. So yes, I would say that that is a large component.
The world is awash with oil. We understand we are using 100 million barrels a day and there is no shortage from the supply side. OPEC is keeping up its side, Russia, the US are at record production. That is probably the unwinding of some of those hedge fund positions.
You have US President Donald Trump at war of words when it comes to China because this has been going on for quite some time it seems a big scare like this could lead to some sort of an overall massive recessionRead More – Source
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