Global financial services firm Morgan Stanley said on Monday that a rapid depreciation in yuan could likely to pull oil prices down into the $20s.
Global financial services firm Morgan Stanley said on Monday that a rapid depreciation in yuan could likely to pull oil prices down into the $20s.
The bank sees the addition of new supply from Iran will likely keep the market oversupplied well into 2016 and keep the current trading paradigm in place.
“Oversupply drove oil to ranges that should slow investment, but it does not set the price level,” Morgan Stanley analysts said, adding that the non-fundamental factors, such as the US dollar will continue to set the oil prices.
“Given the continued US dollar appreciation, $20-$25 oil price scenarios are possible simply due to the currency,” the global financial major said.
A 3.2 per cent increase in the dollar implied a 15 per cent yuan devaluation, which could push down oil by six per cent to 15 per cent, or $2-$5 per barrel, Morgan Stanley said in a note.
On Monday US benchmark West Texas Inter-mediate for February delivery was down 65 cents at $32.51 by 0600 GMT, while Brent was down 75 cents at $32.80.
