In long-term, future of crude still doubtful: Ken Peng, Citi Private Bank
Talking to ET Now, Ken Peng, Strategist, Citi Private Bank, says while geopolitical issues could see spurt in oil price in near term, futures are still driven by the view that fossil fuels are going out of fashion and the expectation for longer term oil prices is still lower.
Edited excerpts:
We were analysing the US-China relations and now again dormant US-Russia relations have come to the fore. Is this going to have a direct impact on oil prices?
Oil prices, yes certainly. We have seen that impact happening already but on top of this, we have a situation in Yemen where Saudi and Iran are fighting another conflict. So, oil prices probably are well supported in the near term. However, if you to look at futures beyond say 2022, we are actually lower than where we were a month ago. So, the near term is very much driven by geopolitics but the distant futures are still driven by the view that fossil fuels are going out of fashion and the expectation for longer term oil prices is still lower. If we do see a surge in oil prices, I would suspect eventually that would become a selling point.
Are you saying that this is just a knee-jerk reaction and it will all settle down or is $70 the new reality?
I think that probably could head there especially when you have Saudi Arabia coming out saying that they want $80 oil to support the IPO. In the near future, I think the oil prices will be supported. But that still does not change the fact that alternatives are coming up very quickly and longer term prospects are still doubtful for oil.
Edited excerpts:
We were analysing the US-China relations and now again dormant US-Russia relations have come to the fore. Is this going to have a direct impact on oil prices?
Oil prices, yes certainly. We have seen that impact happening already but on top of this, we have a situation in Yemen where Saudi and Iran are fighting another conflict. So, oil prices probably are well supported in the near term. However, if you to look at futures beyond say 2022, we are actually lower than where we were a month ago. So, the near term is very much driven by geopolitics but the distant futures are still driven by the view that fossil fuels are going out of fashion and the expectation for longer term oil prices is still lower. If we do see a surge in oil prices, I would suspect eventually that would become a selling point.
Are you saying that this is just a knee-jerk reaction and it will all settle down or is $70 the new reality?
I think that probably could head there especially when you have Saudi Arabia coming out saying that they want $80 oil to support the IPO. In the near future, I think the oil prices will be supported. But that still does not change the fact that alternatives are coming up very quickly and longer term prospects are still doubtful for oil.