Neil Dwane (Allianz) | The financial markets are signalling that the situation in the Middle East won’t get out of hand, but US-Iran friction could continue for some time. The defence industry and oil and gas-related sectors could remain well-supported, but overall we believe investors should be cautious yet patient. Look to higher-quality stocks with lower correlations to the broader market and “hunt for income” if headline volatility is a risk you wish to avoid.
Norbert Rücker (Julius Baer) | Oil prices sold off more than 4% as concerns about supply risks in the Middle East calmed. The latest actions and reactions show that both opponents, the United States and Iran, are shying away from a military escalation out of fear of its potential economic costs. We stick to our Neutral view on oil and see oil prices lower towards year end. Demand should remain soft amidst weak growth, while supplies increase from Canada to the North Sea.
Mueid Al Raee (The Conversation) |Whether or not the Americans actually want higher oil prices, there are certainly good economic reasons why they probably won’t mind them. Deepening the chaos that started with the US withdrawing from the West’s nuclear deal with Iranis an “easy” way to achieve higher oil prices while meeting other strategic objectives. Yet how the Europeans, China and Russia respond will also determine the global flow of oil from Iran and Iraq.
Norbert Rücker (Julius Baer) | The oil market is off to a rocky start as the tensions between the United States and Iran escalate. The situation brings lots of uncertainty and geopolitical tea-leaf reading on reactions. While the closure of the Strait of Hormuz remains a very unlikely event, the deterioration in Iraq bears supply risks. Geopolitics tend to be a temporary force on oil markets and we believe this time is no different. We raise our near-term forecast to USD 65 per barrel, and maintain a Neutral view on oil.
Bankia Estudios | The sharp increase in oil prices produced by the attack on Saudi installations happened as a moment of weakness in the global economy with multiple centres of uncertainty (trade war, Brexit, global industrial recession, among others); however, it would have to be persistent and much more intense to derail global expansion.
The Corner | For the second time this month, oil prices dropped below 60 $ per barrel. Growth concerns and a bearish market mood drove the latest sell-off, but fundamentals are now adding to the price pressure. US oil inventories swelled unexpectedly and led to a drop in oil prices.
Bankinter | Recomendation Buy and Objective Price 17,4€/share. The rise in oil prices and growth opportunities will drive the share price. Repsol will be driven by exogenous (the sharp increase in oil prices benefits it directly – Brent YTD +39%) indigenous factors.
Morgan Stanley | With oil up 30% YTD, fairly decent quarterly figures, dividends easily covered, with potential to grow and clearly above a market without upside, and with a process of positive profit revisions, we insist in dedicating half an hour to two ideas which are now being oversold and which have lost all they gained in Q1 and which their high dividend is clearly attractive in the market and which we believe could have returns of around 10% in the relatively short term.
A key issue that President Trump’s speech at the UN General Assembly helped highlight was the rising tensions in the Gulf. As one measure of this, analysts at BNY Mellon note that “while it’s tempting to dismiss this as saber-rattling by both sides, the debate over Iran’s ability to close the Strait of Hormuz has been going on since the early 1980s.”
For any investor who believes that $70/barrel is more or less the right price, then the European oil firms are currently fairly priced. Alphavalue recently upped their earnings forecasts to include $70/barrel as a new normality. This leaves the sector with an upside potential of +6% on a 6-month horizon.