A PIMCO executive considers the US 10-year bond attractive. The European economy is compared to the US. A market strategist warns of a wage-price spiral. The Democratic party lacks a logical successor to President Biden. An energy director predicts oil will hit $100 a barrel by Halloween.
The US 10-year bond is currently an attractive investment option according to PIMCO Global Head of Fixed Income, Andrew Balls.
China's strong oil demand is defying concerns about its sluggish economy and will be discussed at the World Petroleum Congress.
There is a risk of a wage-price spiral, as warned by BNY Mellon Senior Market Strategist, Geoff Yu.
Deep dives
1. Strong demand and redistribution between refiners and producers in the oil market
The oil market is currently experiencing a surge in prices due to strong demand, which has surprised analysts despite recessionary fears. However, the impact on end-users is not significant as crack spreads for gasoline and diesel have already been high for the past few months. This surge in prices is more of a redistribution between refiners and producers rather than a direct impact on consumers.
2. China's presence and the dichotomy between its macro data and oil demand
China's importance in the oil market will be discussed at the World Petroleum Congress, as China's oil demand has been hitting record highs despite concerns about its macroeconomic data. While the Chinese economy has shown signs of sluggishness, oil demand remains strong due to a shift towards consumer-oriented consumption. China is also taking advantage of favorable prices to fill its strategic petroleum reserves.
3. Prince Abdulaziz's pressure to increase production and OPEC+ stability
Prince Abdulaziz is likely to face pressure to increase production at the World Petroleum Congress, but he will remain cautious given uncertainties surrounding the global economy, such as the unpredictable actions of the Federal Reserve and concerns about China. The focus for Saudi Arabia and OPEC+ is on maintaining stability in the oil market rather than rushing to increase production. They want to avoid inventory build-ups due to macro concerns.
4. Labor unrest in the United States and the impact on oil producers
Labor strikes in the United States, particularly in the auto industry, could have an impact on oil producers as it affects production and profitability. The discussions with the UAW reflect the ongoing shift in the automotive industry towards electric vehicles and the potential decline in fossil fuel demand. The outcome of these negotiations could impact the viability and future of oil producers as the industry faces energy transition challenges.
5. Short-term outlook and the potential for oil prices to reach $100
The short-term outlook for oil prices is expected to remain strong with the potential for prices to reach $100 by Halloween. Strong fundamentals and positive positioning by hedge funds, combined with the return of passive money, contribute to this outlook. However, it is important to note that the average price for Brent crude is not expected to stay above $100, but rather experience a temporary upswing.
Andrew Balls, PIMCO Global Head of Fixed Income says the U.S. 10-year looks attractive right now. Gilles Moec, AXA Group Chief Economist compares the European economy to the US. Geoff Yu, BNY Mellon, Senior Market Strategist says there's a risk of a wage-price spiral. Greg Valliere, AGF Investments, Chief US Policy Strategist says, there is no logical successor in the Democratic party for President Biden. Amrita Sen, Energy Aspects Director of Research says oil will hit $100 a barrel by Halloween.
