ANZ economist views oil price jump as a market reset, not a shock

“Oil is up $10 per barrel from the lowest levels we have seen in quite a long time. It doesn’t look like an oil shock. It looks like a price adjustment,” said Richard Yetsenga, Group Chief Economist at ANZ Research.

He noted that a month ago, the market was pricing in excess supply, but now it is factoring in tighter supply.

On the broader market response to Middle East tensions, Yetsenga said the global economic impact remains limited. “We shouldn’t gloss over the enormous human cost, but the size of the economies is relatively modest,” he said. “It does affect oil prices, and the oil market has moved. But so far, it is not just a US asset market signal - the signal from most markets is that this is an oil market issue, not a global economic problem.”

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On trade agreements, Yetsenga said expectations for rapid deals were always unrealistic. “The probability of some 80 trade agreements being reached in three or four months was always extremely low,” he said. While some countries may get extensions, he said that a handful of countries having their agreements extended doesn’t mean everybody has their agreements extended.

However, he viewed the US administration’s recent approach positively. The US appears to be keen on ensuring that there is minimal economic or market damage from the trade agreements. That is the most important signal, he said.

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In India, Yetsenga acknowledged recent strength. “That monetary injection by the Reserve Bank of India (RBI) has sent a powerful signal,” he said. Lower inflation trends are also a positive sign. “India looks like a very solid story in a global economy that is dealing with quite a few headwinds.”

Regarding China, Yetsenga said a trade framework with the US is in place, but the details - especially in areas like rare earths and tech exports - will be key. While a pickup in China’s retail spending is good news, he cautioned that it may not last. “That doesn’t seem consistent with what we are seeing in household behaviour, and the loss of consumers in China is  likely to be a drag on spending.”

For the full interview, watch the accompanying video

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