MacroResearchBoard

Global Oil Prices: The Calm Before The Storm? – October 30, 2023

A just-published report updated our investment strategy and positioning in view of the recent spike in DM government bond yields to fresh highs for the decade. MRB has been a strident bond bear over the past 2+ years, but we are (finally!) leaning towards being buyers on bond price weakness, rather than shorting on strength. While bond yields should consolidate in the near run, a sustained decline in yields is not yet in the cards given the resilience of the global economy and sticky DM inflation.

The report also provided an update on one of the biggest wild cards hanging over the global economy and asset markets, namely developments in the Middle East and the oil market. The outlook for oil prices over the next 6-12 months is modestly positive, as better than expected global growth aligns with Saudi Arabia’s own price and revenue preferences. However, speculation that a restocking of the U.S. Strategic Petroleum Reserve will be a catalyst to higher prices is entirely misplaced.

Of course, as is so often the case with oil, geopolitical risks are the wild card. For now, we expect oil prices to hold below “expensive” levels, but stay tuned.