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How to play the oil price swings

Paris, France, 5/31/18,  by Amundi

Oil price: We confirm our target price for the next 12 months in the range of $60-70 per barrel. Geopolitical risks have pushed the price up above 70$ per barrel in the past weeks.Inflation:

The recent increase in oil price is expected to have very limited impact on core inflation as the rise in oil price is perceived as temporary.

Growth: On growth impact, there are winners and losers.

Investments: In this maturing phase of the cycle, which remains mildly favorable for risk-assets but with limited directional conviction, the resilience of the oil price may open opportunities for relative value exposures i.e. a preference for the energy sector in the equity space and in US HY, unless there are significant deviations from the current OPEC policy which would require a reassessment of the investment case.

The overshooting phase of oil price above 70 USD per barrel driven by geopolitical risks has been suspended by speculations of a potential policy shift by Saudi Arabia and Russia. The two countries announced – in a move not coordinated with OPEC partners- a possible increase of their output. The issue will be probably discussed in the next OPEC meeting in June, so far we confirm our target price for the next 12 months in the range $60-70 per barrel.

OPEC has mainly been responsible for recent swings in supply. OPEC increased production to discourage US shale oil producers during the period when the economic environment was fragile. We would note, however, that the cartel cut production during the 2017 global economic recovery, with April of that year showing the lowest production level in three years.

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Amundi is Europe’s largest asset manager by assets under management and ranks in the top 10[1] globally. It manages more than 1.470 trillion[2] euros of assets across six main investment hubs[3]. Amundi offers its clients in Europe, Asia-Pacific, the Middle East and the Americas a wealth of market expertise and a full range of capabilities across the active, passive and real assets investment universes. Clients also have access to a complete set of services and tools. Headquartered in Paris, and listed since November 2015, Amundi is the 1st asset manager in Europe by market capitalization[4].

 

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Footnotes

 

  1. ^ [1] Source IPE “Top 400 asset managers” published in June 2018 and based on AUM as of end December 2017
  2. ^ [2] Amundi figures as of September 30, 2018
  3. ^ [3] Investment hubs: Boston, Dublin, London, Milan, Paris and Tokyo
  4. ^ [4] Based on market capitalization as of September 30, 2018

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