The commodities market had another very tumultuous week as the U.S. dollar weakened and tensions in the Middle East pushed up oil prices. The most striking event of the week was the campaign of air strikes launched by Saudi Arabia and its Sunni allies on the Houthi rebels in Yemen and Iran nuclear talks
- According to various sources, some 100 combat jets and close to 150,000 soldiers were involved in this military intervention. The Sunni coalition is strong, with Pakistan, Egypt, Sudan, Jordan, the United Arab Emirates, Bahrain, Kuwait, Qatar and Morocco supporting Saudi Arabia in this offensive. The coalition has even planned a ground offensive to prevent the fall of the government of Yemen! The objective is clear: counter the rise of Iran in the region. Iran has been gradually gaining control in Iraq, Syria and Libya. This conflict could have major long-term consequences on the most important oil-producing region in the world.
- We continue to believe that the impact of a cutback in drilling operations in the U.S. will be felt later in 2015. Fewer and fewer new wells will be going into service over the next few months, and new output will not be able to offset the natural decline from existing drilling. According to the latest data, U.S. shale oil production has fallen sharply. For example, monthly output growth was 170,000 barrels per day in December 2014 and 70,000 barrels per day in March 2015, and it should begin to decline in May. These signs of a slowdown have been well received by investors, who are already beginning to anticipate a rebound in prices.
- Negotiations in Iran have continued over the weekend but important issues seem to persist at many levels. We will monitor this closely in the coming days.
Emmanuel Tessier-Fleury