The silver lining for investors in emerging markets, according to Wood, is that a rise in in oil
prices will see US
dollar levels go south.
Brent crude oil
prices hit a four-year high of $80 per barrel recently, stoked by fears of an escalation in trade war between US
and China, proposed US
sanctions on Iran
and Opec’s decision to extend oil
quotas till 2018-end. However, prices have cooled off since then as some of these concerns eased. Even then, Brent crude oil
prices are around 47 per cent higher at around $72 a barrel level currently compared to the year ago period.
“A much more near-term factor that could serve as a catalyst for higher oil
prices is the American demand that the world should stop importing Iranian oil
by early November. This is a big deal, if really enforced, since Iran
accounts for about 5 per cent of global oil
supply and it is far from clear that this supply can be easily replaced,” Wood says.
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Analysts at S&P Global Platts, a leading independent provider of information, benchmark prices and analytics for the energy and commodities markets, also expect oil
prices to remain elevated and forecasts a range of $75 – 80 per barrel over the next 18 months given the global developments.
tariffs and China's retaliatory response, they believe, has emerged as a big risk for commodity
demand and prices in 2018, alongside a slowdown in the Chinese economy and geopolitical uncertainty.
“While there are risks to the macro-economic picture, most notably in the biggest oil
consumer China, the global demand trend for oil
remains relatively strong. Higher oil
prices could start to crimp demand for crude if they remain elevated, dragging on global gross domestic product (GDP) growth, with signs of concerns in places like Turkey and Brazil for instance, which could have a far greater impact on overall demand growth,” said Paul Hickin, associate director at S&P Global Platts.