Saudi Crown Prince’s crackdown: geopolitical events will have more of an impact - ANZ

Analysts at ANZ explained they read the weekend headlines about the Saudi Crown Prince’s crackdown on corruption and the arrest of a number of top officials, princes and billionaires, he wasn’t quite sure what to make of it. 

Key Quotes:

"Well markets appear a little more convinced and have sent oil prices to the highest level in over two years overnight."

"Reports of escalating tensions between Saudi Arabia and Iran won’t be helping sentiment either. This crackdown is coming at an interesting time for oil markets. Last month our commodity analyst noted that the improving macro backdrop should help oil demand growth edge higher over the coming quarters, and while there were more questions oversupply (especially whether or not OPEC countries adhere to their agreed production cuts), inventory levels should still fall."

"Arguably then, when you have a market that is in better balance, geopolitical events will have more of an impact. No doubt central banks will be keeping a close eye on developments (especially as broader commodity prices are rallying too)."

"There have certainly been a number of head-fakes before, and there is of course much more to the inflation outlook than just commodity prices, but it does appear that the global inflation dial, when joined with tightening labour markets, is beginning to point a little more upwards again."