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The Trump administration announced Monday that it would end Iran's oil output. Crude prices surged after the announcement, with the U.S. benchmark, West Texas Intermediate crude, gaining nearly 3 percent.
Savita Subramanian, head of U.S. Merrill Lynch said it was "good for corporate earnings because of the S & P " levered to oil so I think that's a potential silver lining of higher oil. [s] for the year where analysts are penciling in super low expectations And then … consumers are making more But we're getting to a point where this could turn ugly. "
But $ 5 a gallon in California is not a good environment to be in. Aperture Investors CEO Peter Kraus did not anticipate major changes to the status quo:
"I think the oil prices are going to continue to decline." We are not going to see mo re holes being punched in the world to create more oil at these current prices. And so my guess is that economic activity stays [and] oil prices will remain relatively constant. […] People predict oil that is going to $ 100, $ 120 a barrel, which I do not see happening. "
Alex Dryden, global market strategist at JP Morgan, said macroeconomic global risks could catch up to the oil market itself:
"I think what you're looking for is incoming restrictions on supply. That's going on in Venezuela, this is likely to be the oil price up [like] we've seen this morning. Now, again, it's about how sustainable that oil price is. You look at … the futures market. Go three years out – you typically go out that far when you want to take out political risk and look at how much geopolitical risk premium [is] priced into oil. Right now, it's some of the highest levels since the Arab Spring. That's not exactly a great backdrop for energy companies to do so. So, some marks over it. "
RBC Capital Markets' head of US equity strategy, Lori Calvasina, What's bullish on the prospect of higher oil prices for the broader market:
" We actually think higher oil prices are good for our S & P 500 [earnings per share] estimate. It tends to be good for energy company earnings. Out of print, generally, we think we are getting higher oil prices. I would say energy [is] this sector [that] looks super cheap to us. You're in the middle of an audit return rebound in that space; 2020 earnings expectations actually look pretty good. I think, as long as that can hold up, I actually think this can help generate excitement in the space. "