Nicholas Brooks is head of research and investment strategy for the ETF Securities group of companies and share his outlook on oil in the global macro context, factors influencing its price formation and how Exchange Traded Commodities, ETCs, can be implemented to strategically and tactically get exposure to oil - capture performance and/or serve as a hedge.
Nicholas has over 15 years experience as a global economist and strategist, covering a wide range of markets and asset classes. He has also completed work on a PhD thesis examining financial fragility and the dynamics of financial crisis.
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Q1 - As of this morning oil seems to be on its longest winning streak since January 2010 - how long do you believe this upward trend can be supported and
Q2 - At what level do you see it reaching a "breaking point"?
What in your opinion are the main factors influencing oil price formation given the mixed signals we’re receiving -i.e.
On the one hand we have strong signs of an economic recovery in the US, Germany
Vs. the rest of the Eurozone which is likely to slip into recession this year
Yesterday [23.02.2012] according to the US Energy Department's Energy Information Administration - crude inventories rose 1.6 million barrels last week and oil demand has dropped 6.7 percent from a year ago.
Iran as OPEC’s second largest producer – production halts and the impact of the embargo, isn’t this already priced in by markets?
Is this then just a psychologically driven rally?
Q4 - What would be the best way to implement these views as an oil trade? Why via ETCs/ETPs?
The risks: of a roll over in contango - how can it be avoided/minimised/hedged out?
Q5 - Do ETCs/ETPs offer the ability to arbitrage across listed markets, products - for e.g. trade the spread between WTI and Brent Crude?
Q6 - Why are ETCs more favourable than investing directly in the futures market?