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The UK’s flagship UK Index index has rebounded strongly since mid-February, almost retracing all of its 2016 losses and joining the US Dow Jones in positive territory. But were you aware of the progress that the price of Oil has made from its most depressed lows of late? The UK Index may have bounced by a very respectable 13% in just 6 weeks, but the price of a barrel of Brent Crude Oil has put on a much more impressive 50% from its worst levels. That’s a huge reversal, and one which may even have another 10% to go if a bullish pattern we have identified is to be trusted (a 3-month inverse head & shoulders reversal pattern in case you are curious). While this represents an idea from the commodities space, we can’t ignore a potential knock-on idea within equities.
The share price of BP (BP) has only recovered 17% since February and remains hindered by a long-term downtrend of falling resistance. Peer Royal Dutch Shell (RDSb), however, has seen a real revival of interest, putting on a whopping 38% from end-January which has helped it break beyond its 18-month trend of falling highs and key technical indicator – the 200-day moving average. While the latter has been helped by completion of its mega-acquisition of BG Group, the question now is whether both BP and Shell are set to play catch up with the rallying oil price. Furthermore, BP could represent even more recovery potential while it lags its UK 100 peer. With the oil major trading close to resistance, could a breakout be on the cards?
Will the US Federal Reserve hold off from any further interest rate hikes this year keeping the USD weak and supportive of commodities? Will OPEC and Russia agree to a production freeze to help offset the supply glut that has dogged the oil industry over the last 18 months? Or will the price hitting fresh highs simply see a rush of US shale/fracking players back to the party, adding to industry oversupply and send the price back south again? It’s an exciting area to be watching at present, with many moving parts that can be played in isolation or together.
Where do you see oil and those exposed going? To help you stay on top of world events affecting this space and form your investment opinion, trial our industry-reputed research. We’re sure it’ll help
Mike van Dulken, Head of Research, 18 Mar
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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