Mounting concerns over high oil prices, China’s less monetary easing likely to dent market sentiment over coming future: Scotiabank

Mounting concerns over too high oil prices and China’s less monetary easing are likely to dent market sentiment further in the coming future, according to the latest research report from Scotiabank.

The Trump administration announced on Monday that all importers of Iranian oil will have to end their imports shortly or will be subject to US sanctions. In response, Iran said it will block the world’s most important chokepoint for global oil trade, the Strait of Hormuz, if Tehran is barred from using it to export its oil.

Escalating geopolitical tensions could boost oil prices, although US Secretary of State Mike Pompeo also said Saudi Arabia and the United Arab Emirates have agreed to "ensure an appropriate supply (of oil) for the markets" in order to make up for the loss of Iranian oil in the global market.

In addition, oil prices are likely to extend the rally amid increasing net long oil futures positions and an oil curve backwardation, the report added.

China said monetary policies should be pre-tuned and fine-tuned in a timely manner in accordance with economic growth and consumer price changes, according to the statement of the fourth meeting of the Central Committee for Financial and Economic Affairs chaired by Chinese President Xi Jinping on Monday.

China’s CPI inflation rose to 2.3 percent y/y in March from 1.5 percent y/y a month ago, largely due to increasing pork and fuel prices and the base effect

"The high-yielding INR is the most vulnerable to elevated oil prices in the region given India’s continued current account deficit and strong demand for crude oil, while the MYR will likely obtain a brief relief of its recent marked depreciation," Scotiabank further commented.