Oil has been the great casualty of 2014…what will happen to it?
Looking at the similarity with 1986 and the current much more challenging geopolitical situation (previously described) oil will probably try to find a base about USD35-40 between now and the third quarter of 2015. In the third quarter of 2015 two things should happen. The oversupplied stock will start to decrease and also the the protective hedges set by the US shale oil producers will expire. This combined effect will probably get oil up to $65 by the end of the year.
The great unknown is the geopolitical side. Nigeria, Libya, Iraq, Iran and Venezuela cannot withstand such low prices for oil before dissolving in non-state entity, easy prey of Islamic State and the likes of it. Also the terrorist have a clear objective in disrupting the Suez Canal passage – it will not be easy as they stand against some of the most ruthless secret service alliances (US, Israel, Saudi and Egypt), but they will try. An attack there will sharply bring oil back to USD 100.
Gold: gold probably will basing all year and end up towards $1,300. There are selling pressures, but with all the mounting tensions around the globe is hard to see it falling too much.
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