Complex Made Simple

Oil, not crypto, is what’s hot now, as Brent crude hits $80

While oil pushes forwards towards new heights, crypto currencies linger in doubt.

Saudi gets its wish for $80 of Brent crude.

Two weeks after Saudi said it was targeting $80/bbl oil, Brent jumped on Thursday as much as 1% to $80.18, following the latest drop in U.S. crude inventories and as fears around renewed sanctions on Iran continued.

ZERO hedge, a renowned business site said the jump followed a reported from Goldman titled simply “The case for commodities strengthens ” according to which America’s surging shale output won’t be able to replace the potential drop in Iranian oil shipments after the U.S. reimposed sanctions on OPEC’s third-largest producer.

Graph courtesy of Zero Hedge

VIDEO: Is OPEC worried about Nov. sanctions on Iran as oil hits $100 in 2019?

Crypto stuck, oil unhinged

Bitcoin price sank below $8,000 on Thursday for the first time since mid-April, dropping nearly 5% after trading near $8,300 for the majority of the day, ultimately reaching $7,925, before it recovered above $8,000 today.

On April 18, Bitcoin hit $9,990, but has throttled down ever since then failing to go past the psychological $10,000 threshold.

Not oil.

Benchmark oil contract Brent North Sea hit $80 a barrel Thursday for the first time since November 2014, extending a recent run higher fuelled by tight supply concerns.

Prior to Thursday’s peak oil prices had already been rising thanks to steady demand growth and a landmark deal by oil producing countries, both inside and outside the OPEC cartel, to lower output by 1.8 million barrels per day till end 2018.

Read: Which GCC country just struck oil?

Oil is gold

Business Insider (BI), a prominent business site, said Brent crude oil  traded up 0.91% to $80 a barrel on Thursday, or nearly 10% above the level at which traders started paring bets that oil would rise.

Brent has gained nearly 52% over the past year.

Goldman Sachs’ commodity strategists, who have been overweight over the asset class since 2016, said in March that there was no better time in the past decade to invest in commodities.

“Goldman sees Brent rising to as high as $82.50 a barrel, with the current rally has room to run, particularly from a returns perspective, as the current fundamental backdrop for oil is now more bullish than expected as strong demand now faces supply disappointments,” BI quoted Goldman Sach’s as saying.

US shale cannot solve the current oil supply problems. Even if only 200-300 kb/d of Iran exports are at risk by year-end, OPEC is not likely to preempt this loss, only react to it,” Goldman said as reported by Zero Hedge.

Read: Big oil production is still growing despite capital expenditure cuts

“OPEC has never been able to catch late-cycle demand growth to replenish inventories before a recession occurs. And even if growth were to decelerate further, it would take global GDP growth collapsing to 2.5% yoy to simply balance the oil market!”

On Wednesday, the EIA reported that U.S. crude inventories fell 1.4 million barrels last week, while domestic production rose to 10.7 million barrels a day. Despite surging American output, which has topped 10 million barrels a day every week since early February, traders continue to push the price of Brent higher, unconcerned about the torrent of shale production this will unleash.

U.S. West Texas Intermediate crude ended the day unchanged from the previous session at $71.49 a barrel. WTI earlier hit a high going back to Nov. 28, 2014 at $72.30 a barrel, said CNBC.