By eFXdata — Jan 14 - 03:00 PM
Synopsis:
Danske warns of a potential oil glut in 2025 driven by OPEC+ production hikes, rising output from the US and Latin America, and weaker demand due to global growth risks. They outline how this could impact FX markets, favoring oil importers over exporters.
Key Points:
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Potential for Oil Oversupply:
- OPEC+ is expected to hike output in 2025 after multiple delays.
- Increased production from the US and Latin America will contribute to a benign supply situation.
- Weaker global growth, potentially exacerbated by a trade war, poses downside risks to oil demand.
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Limited Support from US Strategic Reserves:
- US purchases for strategic reserves have already increased significantly, suggesting limited ability to further backstop prices in an oil glut scenario.
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Brent Oil Price Outlook:
- Brent is projected to remain stable around $85/bbl in 2025 but faces clear downside risks.
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FX Implications:
- Beneficiaries: Oil-importing currencies like JPY and EUR could strengthen in the event of an oil glut.
- Losers: Oil-exporting currencies such as CAD, NOK, and possibly USD could face downside pressure.
Conclusion:
Danske highlights the risk of a global oil glut in 2025, advising investors to position for potential FX impacts. Favoring JPY and EUR against oil-exporting currencies like CAD and NOK could effectively express this view.
Source:
Danske Research/Market Commentary