Oil traders experienced another wild ride overnight with brent trading in another crazy ~15% range. Ultimately, prices closed down ~9% as optimism for a relatively quick and market-friendly resolution won the day. But, oil prices quickly pared deeper losses after Bloomberg News reported that there was no US escort of an oil tanker through the Strait of Hormuz – West Texas Intermediate came back from earlier losses of as much as 19% that took prices below $80. If Trump can demonstrate that the US can safely help oil tankers pass through the Strait, the oil price is likely to stabilise at lower levels, a supportive backdrop for stocks, though unconfirmed reports that Iran is placing mines in the Strait won’t help.
- We ultimately believe oil will reset back below $US80 in time from Trump’s attempt to maintain control of the House at the US midterms.
MM is cautiously bearish towards oil ~$US90/barrel.
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