Article / 03 October 2016 at 8:15 GMT

From the Floor: Further potential for oil following Opec deal

Your Next Trade
  • Opec production cut plans are a victory for Iran - Hansen
  • Oil up less than 10% in one week
  • Paused oil rally, eased Deutsche Bank concerns push Asian shares higher
  • Brexit timetable hurting GBP
  • Tesla not a buy despite positive surprises - Garnry


By Clemens Bomsdorf

Asian shares are up partly because a few days after the Opec deal has been announced, “the oil rally has paused” reports Edmund Liu from Saxo's APAC Global Sales Trading.

Saxo Bank head of commodity strategy Ole Hansen, reporting live on today's morning call, says he knows why the latter happened. 

“Excitement over the Opec deal has started to fade a bit and the question now is how to split it up as Nigeria, Libya and Iran will be exempted,” he says, adding that Iran has announced to continue to pump. “[The deal] is a clear victory for Iran and a defeat for Saudi Arabia,” according to Hansen. 



The market has taken all this at face value with Brent crude back at $50/barrel. Oil rallied 17% within the week when the deal was initially mentioned in August, but now has done so by less than 10%. This, according to Hansen, indicates that there is a lukewarm attitude to the deal.“Lets say if we can get a test of recent highs,” he adds. At this stage $52-52.5/b is the sell area. In the US, 109 rigs have been added since June of which 7 last week. This contributes to the negative side, says Hansen.

In other commodities gold is failing to react to price-friendly news in the form of a weaker USD, the start of the UK's Brexit process in Q1, as well as troubles in the European banking sector.

Concerns regarding Deutsche Bank are influencing the market and will continue to do so in the near future, says John J Hardy, head of FX strategy at Saxo Bank. However, right now worries have abated a little bit. Fears of issues at Germany’s biggest lender are easing as it is expected to find a less costly settlement solution with US authorities. 

This also supported Asian shares, reports Liu. Official Chinese PMI figures as well as the Japan Tankan Index showing improvement helped Asian markets, too. 

Another big headline these days is the UK's timetable for moving on with Brexit. "GBP can remain vulnerable on the Brexit issue especially if data show further nervousness and do not pick up,” says Hardy. This week, US data are at the forefront with the September ADP payrolls and the September ISM non-manufacturing prints out Wednesday and nonfarm payrolls Friday.

Tomorrow, the Reserve Bank of Australia will announce its cash rate decision and Hardy expects no change. When it comes to AUDNZD, he sees a range of 1.10 to 1.13 as a fair price. 


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Source: Saxo Bank 

Tesla, on the other hand, might not be priced correctly, according to Peter Garnry, Saxo's head of equity strategy. Despite beating expectations when it comes to deliveries, Garnry remains short. 

One share to buy, conversely, is JPMorgan ahead of a rate hike says Saxo's equities head.

Garnry will come out with more details regarding this investment idea later on today.

Clemens Bomsdorf is a consultant editor at Saxo Bank

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


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