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“Sun Worldwide” believes that the price of oil may throw a spanner in the works of the fragile recovery in equities as it becomes more apparent that demand from emerging economies is likely to add to supply concerns.
The Asian-based boutique broker is well-known for its bullishness on crude oil which it believes will average over $90 a barrel in 2010.
A source at “Sun Worldwide” would declined to be named, suggested that analysts at the form had deduced that, with the economies of both China and India displaying relatively rude health, it was beyond all doubt that demand for oil would increase sharply in the coming months. This combined with a modest recovery in developed economies would place strain on supplies and propel prices higher.
The source said that “Sun Worldwide” analysts believe that high oil prices could drive inflation far higher, far more quickly than central bankers have estimated. As the price of oil increases, the cost of importing it could force nations to raise interest rates to combat rising inflation just as their economies emerge from the debilitating recession.
Crude oil has settled into a $63-68 a barrel range after dipping as low as $33 earlier this year. Many analysts concur that the price of a barrel will top $85 before the end of 2009.
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