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Commodities volatility outlook - Deutsche

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - Analysts at Deutsche Bank explained, as oil prices go down, they squeeze high marginal cost production sources, outside the Middle East, while fiscal pain extends to all producers where energy is a large share of GDP and exports.

    Key Quotes:

    "The outstanding question remains – who will blink first, the high marginal cost producers, or some of OPEC’s lower cost producers faced with severe budget constraints? The market is uncertain about the point where these two tensions enforce substantial production rationalization, but with oil sustaining prices below $40/b, we are surely much closer to the point of supply restraint.

    This is another way for saying that oil prices and most commodities have much less downside the more they fall! While the level of prices matters for volatility, so does the rate of change of prices, and the latter factor should be less destabilizing for markets, and less encouraging of volatility in 2016."
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