Oil price scenarios ahead of Doha meeting

Bank of America has published a report entitled “Reduce risk heading into the Doha meeting” in which the bank details 4 possible scenarios coming out of the OPEC meeting this Sunday in Doha. The scenarios are back to a price war, no output freeze, a soft output freeze, and a hard output freeze with some enforcement mechanism.

In our view, the last two scenarios would send Brent prices above $50/bbl in relatively short order, while the first two outcomes could lead to a price drop below $40/bbl.

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La Niña is coming: Here’s what it means for commodity markets

La Niña is coming. Hot on the heels of a record setting El Niño, another potentially strong weather phenomenon with very different characteristics could emerge later in 2016.

A consensus of longer-range computer models now show La Niña conditions emerging by around July, and should peak this winter at a moderate intensity. Strong El Niños are much more likely to be followed by a La Niña. The three strongest El Niños on record — in 1972, 1982 and 1997 — all transformed into La Niñas. In the video below the US National Oceanic and Atmospheric Administration explain what’s about to happen.

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Change in investor sentiment could see oil falling back to the low $30’s

A change in investor sentiment could easily result in oil prices falling back to the low $30’s per barrel. That’s the view of Barclays who highlight that net positions from money managers (e.g. hedge funds and other speculators) in crude are approaching bullish extremes, a position from where sentiment has reversed very rapidly over the past couple years (figure 1). If sentiment does change quickly and this is reflected in money managed positions then this could imply that WTI crude futures prices fall back close to $30 per barrel (figure 2).

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