Oil price may have bottomed, says S&P DJI analyst

Jodie Gunzberg, global head of Comodities at S&P Dow Jones Indices, has said that prices for energy stocks and bonds suggests a bottom may have been reached in the price of oil, with the S&P GSCI Crude Oil index bounding up 9.7% in the past week – one of its best weeks since 1987.

The index also had a good weeek at  the end of August this year, gaining some 11.8%, Gunzberg said in an analyst note.

However, the picture is  still clouded by a number of factors afffecting both supply and demand for oil, she added

“Although many supporting events happened simultaneously last week like a continued drop in US rig counts, concern about falling production in Canada and Bakken, the decision by the Fed to hold off on the interest rate hike and the Russian attacks on Syria, it’s difficult to make the case the rally is sustainable.”

“Inventories are still very high and demand is questionable. According to the IEA’s Oil Market Report, ‘a projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels – should international sanctions be eased – are likely to keep the market oversupplied through 2016.'”

Gunzberg said that data from sources such as the Pira energy group and Morgan Stanley argue for a rise in the price to $75 by 2017.

She goes on to say that there is evidence from the S&P 500 series of bond indices as well as S&P 500 equity sector indices, which point to a spike in equity risk premium associated with US energy companies in October, w.ith spreads shifting from discounts to prermiums. This could be a marker that the market feels that oil prices have bottomed.

 

ABOUT THE AUTHOR
Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 16 years he has been based in London writing about funds and investments . From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope.

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