A tempered view of oil prices following attack

 In Newsletter

The attack at the heart of Saudi Arabia’s oil industry shocked markets, leading to the biggest single-day jump in prices on record and rapid reassessment of global risk and how the event could affect economic growth. To be sure, the attack was unprecedented — 5% of global supply was knocked out — it is going to take Aramco, the Saudi national oil company, months to recover, and geopolitical uncertainty has ratcheted higher.

 

So, with all the upheaval, how should companies be planning for the medium-term? Oil prices have rocketed higher than all expectations, and forecasts made since the attacks have them staying elevated while tensions remain high.

 

However, it is also helpful to check the fundamentals and the underlying data. Based on our AI-driven forecasting engine that relies solely on hard data and machine-learning algorithms, we should expect oil prices to soften over the next few months. That could provide one baseline for companies to operate from.

 

ICE Brent Crude Oil Futures (B10) Forecasts Until Nov 2019

ICE Brent Crude Oil Futures (B10) Forecasts Until Nov 2019

This chart was generated using CI Futures. Book a demo to see it in action.

 

Analysts and oil industry executives that have downplayed the impact on oil markets, argue slower economic growth means price gains will be capped by relatively weak demand. Our models back this up, and for months have been predicting generally softer growth going into the end of the year. We don’t see the S&P 500 Index regaining their July highs this year, and US GDP growth should continue to moderate.

CME S&P 500 Index Futures #1 (SP1) Forecasts for Nov 2019

United States GDP Annual Growth Rate Forecasts Until Nov 2019

CME S&P 500 Index Futures #1 (SP1) and United States GDP Annual Growth Rate Forecasts Until Nov 2019

This chart was generated using CI Futures. Book a demo to see it in action.

 

Gold prices, closely watched during times of economic stress or uncertainty, should be mostly flat through November.

NYMEX Gold Futures (GC1) Forecasts for Nov 2019

NYMEX Gold Futures (GC1) Forecasts for Nov 2019

This chart was generated using CI Futures. Book a demo to see it in action.

 

Of course, we can’t predict where or when the next regional conflicts will flare up and hit markets, but the fundamentals at least suggest still decent but slightly slower growth over the next few months.