Oil may be about to spike, and JPMor­gan has trades to play it

The Star Malaysia - StarBiz - - Front Page -

NEW YORK: Oil prices, al­ready at more than three-year highs, may be about to jump fur­ther.

And, to JPMor­gan Chase & Co, crude-re­lated as­sets are start­ing to look at­trac­tive.

Brent oil could spike to US$80 a bar­rel if the US and Euro­pean Union reim­pose sanc­tions on Iran and as West­ern pow­ers ex­pand the scope of the Syr­ian civil war, JPMor­gan strate­gists, led by John Nor­mand, wrote in a note.

While this might or­di­nar­ily be seen like a time to avoid cycli­cal as­sets, the re­cent “tax gift” to US cor­po­ra­tions and con­sumers makes it an op­por­tu­nity to own petro as­sets, they said.

“Risks we thought might ma­te­ri­alise this sum­mer through Iran sanc­tions are emerg­ing some­what more quickly due to events in Syria,” said the strate­gists.

New Syr­ian hos­til­i­ties are likely to have a muted ef­fect on oil, how­ever, since the na­tion’s pro­duc­tion has al­ready fallen so deeply due to the seven-year-long war.

A pos­si­ble de­ci­sion in May on Iran sanc­tions may be “the start of a process that main­tains low-in­ten­sity stress on oil mar­kets that can de­liver higher prices and above-av­er­age volatil­ity,” the strate­gists wrote, com­par­ing it to the Arab Spring of 2011 rather than the ma­jor oil shocks of 1973, 1979 and 1990.

The fore­cast fol­lows oth­ers call­ing this a good time to own en­ergy stocks. Mor­gan Stan­ley strate­gist Andrew Sheets has noted that en­ergy “has his­tor­i­cally been a very con­sis­tent late-cy­cle out­per­former.”

Brian Bar­ish of Cam­biar In­vestors and James Paulsen of Leuthold Wee­den Cap­i­tal Man­age­ment have pointed to en­ergy shares hav­ing been out of favour in re­cent years. Net bullish po­si­tions in Brent fu­tures reached a record in the week ended April 10.

— Bloomberg

Hot oil: A sup­port ves­sel sails along­side the crude oil tanker Devon as it sails through the Per­sian Gulf to­wards Kharq Is­land oil ter­mi­nal to trans­port crude oil to ex­port mar­kets in Ban­dar Ab­bas, Iran. Geopo­lit­i­cal risk is creep­ing back into the...

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.