Regency Associates has urged institutional clients to ignore the current bear market rally in oil prices warning the apparent bounce is technical in nature. The Tokyo-based broker also suggested that hopes for an agreement between OPEC and other producer nations aimed at engineering a coordinated cut in output would likely amount to nothing.

Crude oil prices have mounted a 20% rally since setting 12 year lows recently and many commentators have gone as far as to call a bottoming in the market but Regency Associates believes that it will be short-lived.

“A loose agreement between what are, essentially, bitter rivals trying desperately to cling on to their market share is never going to fuel anything beyond a relief rally. Only an uptick in demand, a fall in the strength of the US dollar or meaningful, sustainable cuts in global production will change the fundamentals for oil and, consequently, we think investors are best advised to avoid chasing this rally,” explained Kester Humbel, who leads commodities research at Regency Associates.

Initial estimates among the members of Humbel’s team have the rally succumbing to renewed selling pressure at or around the $36 mark which, he says, should be reached early in the week.

Expectations of production from Iran which recently returned to the global oil market after an absence imposed on it by recently-lifted international sanctions faded after the country suggested it could ill-afford to cut production until its output reached pre-sanction levels.

“A sustainable rally is some time away and until then, we recommend investors hold fire,” said Shem Orbison, Regency Associates’ chief economist.
About Regency Associates
When you make the decision to invest for better returns, you naturally want to make sure that your encounter with the markets is a long and prosperous affair. To achieve the former, you need to seek advice from those with a consistent record of success in securing gains for investors. In a bull market, anyone can make money but it is when the roar of the bear resonates through the world's bourses that superior investment firms like Regency Associates stand head-and-shoulders above the rest.