Silver Ridge Resources says that not all of oil’s price woes lie in the supply glut and that a resumption of the US dollar’s decline will see prices above $60 a barrel by year end
Silver Ridge Resources says that although much is being made of the supply glut’s role in low oil prices, the relative strength of the US dollar is playing a significant role in limiting any attempts by bulls to stage a sustainable rally.
Oil, like most commodities, is priced in US dollars and with the dollar’s strength gaining since the end of the Federal Reserve’s so-called QE3 monetary stimulus program, prices have suffered a “triple whammy” based on slowing global demand, oversupply and dollar strength.
According to Vivian Ericsson, chief commodities and resources research at Silver Ridge Resources, oil prices are unlikely to stage a meaningful return until the dollar weakens. “That’s not as far off as people think,” she said, adding “The Fed’s running out of bluff vis a vis interest rates. We really don’t think there’s much in the way of room to raise interest rates when the economic data emerging from the US makes for some quite grim reading. Once markets realize that rate hikes are a little more than a pipe dream – probably by the start of the 2nd quarter – I think we’ll see a very sharp rally in oil prices.”
Silver Ridge Resources says many investors underestimate the effect a strong dollar has on commodity prices, particularly oil, and have placed disproportionately greater weight on chronic oversupply and slowing demand. “While we don’t anticipate a return to $100 oil in short order, we certainly expect a line to be drawn at around the $60 a barrel level,” concluded Ericsson.
About Silver Ridge Resources:
Founded in 2005, Silver Ridge Resources is an independent, full-service brokerage, investment planning and management concern committed to delivering innovative capital appreciation and preservation solutions to individuals and families with a high net worth. We place the welfare of our clients and their families first and we pride ourselves on having become the first port of call for their financial affairs. We consistently exceed our clients’ expectations by going the extra mile in terms of attention to detail, delivery of service and, most importantly, returns on investment.
From our headquarters in Shanghai, China and offices around the Asia Pacific region, we currently oversee the deployment of over $4.5 billion of assets on behalf of clients both in Asia and around the world.
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