Market Buzz: The Big Players Turn Bullish Again
(eToro Blog) The last week saw sharp declines in commodity prices and equity markets, with oil taking a big hit as Eurozone worries rose to the fore. After the drop in oil prices, which many analysts point out was merely correcting the speculative rise in prices, oil is once again trending upward. This time it's brought upon by growing speculation that OPEC's spare production capacity will be reduced as a result of the supply cuts in Libya. Experts' forecasts are also supporting the uptrend, evidenced by oil futures trade, which was up by 0.7% today.
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In a recent Crude Oil Update, Morgan Stanley analysts forecast that London-traded Brent crude will rise to $120 per barrel by the year's end. That's the same sentiment expressed by J.P. Morgan's analysis released last week, noting that production isn't meeting demand. Analysts at Goldman Sachs appear to be a little more optimistic, predicting a rise to $130 a barrel. The Morgan Stanley update notes that, in the absence of a production increase by OPEC, all of the other fundamentals, i.e. firm demand from emerging markets and curtailment of Libyan production at least through the end of 2011 supports higher prices.
Most analysts concur that spare capacity will diminish as a result of the violence and turmoil in the oil producing countries. That suggests that, given the fundamentals, upside price risks are more inherent. Tomorrow, the release of the U.S. Energy Department report is expected to confirm that U.S. inventories fell last week.
With Morgan Stanley, J.P. Morgan and Goldman Sachs analysts all turning oil bullish, that begs the question, could oil be oversold in the longer term? Regardless, in the near term, analysts see the demand for oil as a boon for oil investors, as well as those commodity-linked currencies such as the Australian and Canadian Dollars. For that matter, Goldman's analysts are bullish on metals, too, in the near term and see gold with plenty more room for growth.
Oil investors' sentiment on the eToro trading floor is in favor of selling by a ratio of 7 sellers to 5 sellers. Sentiment among eToro's traders of USD/CAD also favors selling over buying by a slight 6 to 5 ratio, with similar sentiment among AUD/USD traders, sellers outnumber buyers by 6 to 4.
Copyright 2011 eToro Blog
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