Asia/Pacific News
Asia Demand Seen as a Far Bigger Problem than Brexit as Oil Drops 5%
Despite a drop in oil prices earlier this week attributed partly to a resurfacing of Brexit fears, John Kilduff, partner at Again Capital, echoed the sentiments of many analysts by stating there are far bigger things to worry about, namely, Asian demand.
He did so in the wake of oil prices falling nearly 5 percent on Thursday, with Brent crude futures falling to $46.40 per barrel and West Texas Intermediate settling down to $45.14 per barrel.
Speaking on CNBC, Kilduff dismissed any significant impact Brexit may have on the world market by stating "it'll take two years for the [exit] process to kick in, and even then it's hard to see the European Union punishing the UK to such a degree it hurts both of their economies."
Instead, he pointed to global overproduction and export as a key concern, adding that "you really have to go with some of the fundamentals in the market, in terms of Asian demand outlook."
Kilduff went on to explain that Asia is "the key demand centre" that bears close scrutiny over the next few weeks as economic data emerges from China: "There are bigger problems there than we ever thought."
The analyst also expressed his disappointment in gasoline, noting that it was "supposed to be the big star of the complex" but in the U.S., at least it's becoming evident the demand "isn't as great as it was earlier this year."
As for oil prices in the near future, Kilduff suggested that the next resistance levels are $43 to the downside and $47.50 on the upside.
Despite Kilduff's remarks, CNBC stated that "Fears of economic turmoil after Britain's exit from the European Union are ... hanging over global markets"; it also theorized that the Asian demand slowdown may be due not only to an economic slowdown but "perhaps even more permanent structural changes."
But Kilduff's views are supported by many respected pundits, including Olivier Jakob, oil analyst at Petromatrix, who recently pointed out that weak refined products are pressuring crude, and that "Asia has been relatively weak and China is not providing much support.
"Without the support of the products and with a structure in crude oil that is weakening, it is difficult to think that crude can break away to the upside."
