16 May OIL BOUNCES BUT STILL IN BALANCE
Last June, oil hit an interim low of about $42.50 and started to climb.
By May 7, 2018, it had crossed $70 for the first time since 2014. President
Trump announced the U.S. would be withdrawing from the Iran nuclear deal the
next day. We view rising oil prices as largely a result of rebalancing supply and
demand, and believe prices will stabilize as markets digest the recent news.
The Organization of the Petroleum Exporting Countries (OPEC), its partners, and
U.S. production growth should be able to compensate for reduced Iranian supply.
Even if prices stabilize at current levels, it will be a modest hit for consumers,
especially those at lower income levels, and it may temporarily push headline
inflation higher; however, we believe the impact may be small compared to
economic support from a strong job market and the new tax law.
View the full weekly economic commentary here.
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