Crude prices have slightly cool down. However reducing gap between WTI Nymex and Brent has ensured that WTI Nymex hitting November 2014 highs. Even though the prices have cool down, the market remains tight mainly due to supply disruptors in Canada, Libya and Venezuela.
The market is estimating a record demand in the second half of 2018 and the spare capacity have gone down considerably.
With regards to the metals space, it closed the week in negative but the space has stabilised after a sell-off earlier this week. Base metals have seen multi-month lows this week and things have been worse for gold.
Gold hit 2018 lows this week and went through its worst monthly decline since November 2016.
India demand has also gone down by 50 percent in the last 2 months while the retails buying has gone down by 30 percent.
The rupee hit a record low this week. Moreover, a strong dollar, weaker yuan, high crude oil prices and month end demand will not make life easier.
To discuss the outlook on metals, currency and oil, CNBC-TV18’s Manisha Gupta spoke Jonathan Baratt of Ayers Alliance and Akhil Mittal of Tata Mutual Fund.
According to Mittal, for countries like India who are net importers or net current account deficit countries, the volatility in crude oil prices over the last three months caused lot of tension in terms of impact on inflation, fiscal, where we are going in terms of current account deficit.
All these worries plus trade war fears, China retaliating led to emerging market currencies weakening, said Mittal.
Baratt said no double it has been a volatile week for crude. If one were to look at the spread then WTI is in focus because it is nearing new highs whereas Brent hasn’t tested the $ 80 per barrel mark yet, which could be a lot to do with what is happening in the US.
So, while there are supply issues and less production, the Brent could test the $ 80/bbl levels and WTI contract could move into new areas of around $ 77/bbl, said Baratt.
With regards to gold, Baratt said it has lost its flavor and expect it to hit $ 1220 per ounce.
Mittal said the rupee trajectory would largely depend on how the global economy or global financial markets behave and any further depreciation in Chinese yuan is not good for emerging market economies. Rupee could range broadly between 66 and 72 to the dollar in 2018, however, a slowdown in tariff war could help.