Tuesday, June 24, 2014

Equity markets capping further energy price increases

The Iraq crisis has pushed oil prices up some 5% since the start of the militant Sunni uprising. Some blame the risks of regional conflict escalation on today's equity selloff in the US. But Brent oil has since stabilized and some are asking whether this is the extent of the Sunni rebellion impact. Is the "disruption" premium in crude oil markets now fully priced in?

There is no quick solution to the situation in Iraq and we are likely to see violence persisting for months to come. But the equity markets are telling us that the risks of significant energy price increases from here are not likely. The massive outperformance of the energy sector in recent days has almost vanished.

Blue= S&P500 ETF; Orange = energy index ETF (source: Ycharts)


Sign up for our daily newsletter called the Daily Shot. It's a quick graphical summary of topics covered here and on Twitter (see overview). Emails are distributed via Freelists.org and are NEVER sold or otherwise shared with anyone.

From our sponsor:
Related Posts Plugin for WordPress, Blogger...
Bookmark this post:
Share on StockTwits