Blokland’s daily sketch

Blokland’s daily sketch


What is the oil price telling us?

  • Jeroen Blokland
    Portfolio Manager

Oil prices, which were already in a bear market, took another dive yesterday after OPEC cut its oil demand forecast for next year. Crude went down as much as 7%. Today’s sketch, a chart from The Economist, shows that an oil price of USD 50 is better for GDP growth than a price of USD 100, unless you are an oil exporter. And since the rise of shale oil production, the US belongs to this group too (which makes it all the more interesting that president Trump wants to see oil prices lower, not higher). However, the question is, what is oil really telling us? Is it that GDP growth is heading for a downturn, which is obviously bad news for risky assets? But if the slowdown is temporary and/or specific developments within the oil market and OPEC are at work (and they are), things may not be as bad as they seem. Also, I do believe that the increasing efforts to reduce CO2 emissions globally should at some point be reflected in the demand for oil. Anyway, I am not convinced that we have reached the end of this economic cycle yet.

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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named one of the ‘50 Twitter accounts for investors 2017’ by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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What is a Wholesale Client?
A person or entity is a “wholesale client” if they satisfy the requirements of section 761G of the Corporations Act.
This commonly includes a person or entity:

  • who holds an Australian Financial Services License
  • who has or controls at least $10 million (and may include funds held by an associate or under a trust that the person manages)
  • that is a body regulated by APRA other than a trustee of:
    (i) a superannuation fund;
    (ii) an approved deposit fund;
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme.
    within the meaning of the Superannuation Industry (Supervision) Act 1993
  • that is a body registered under the Financial Corporations Act 1974.
  • that is a trustee of:
    (i) a superannuation fund; or
    (ii) an approved deposit fund; or
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme
    within the meaning of the Superannuation Industry (Supervision) Act 1993 and the fund, trust or scheme has net assets of at least $10 million.
  • that is a listed entity or a related body corporate of a listed entity
  • that is an exempt public authority
  • that is a body corporate, or an unincorporated body, that:
    (i) carries on a business of investment in financial products, interests in land or other investments; and
    (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of section 82 of the Corporations Act 2001, the terms of which provided for the funds subscribed to be invested for those purposes.
  • that is a foreign entity which, if established or incorporated in Australia, would be covered by one of the preceding paragraphs.
I Disagree