Over the last few years/months, starting from North Korea to the recent reissue of the NAFTA deal, when the dots are Connected, we observe that there is a pattern which is being made. Let’s see look into each of Trump’s activities, his behavior and his attitude. In this article, We will be driving some meaning reasoning from the facts already available to bring a clear picture to our thesis.
We believe that the Oil prices won’t reach the market’s price estimations of $100 per barrel, rather it would fall down to $60-$70 per barrel. Let’s us go through why we feel such and which Indian Stocks are potential bargains now!
One year before, North Korea was about to test its ballistic Nuclear missile over the Pacific horizon. This type of missile testing leads to traveling of radioactive particles along with the wind direction to various different locations of the world. The Missile testing of North Korea is expected to generate yield at around more than 15 million tons which is way very larger than the Hiroshima bomb. This could have a significant impact on the neighboring countries. The US government restricted/opposed North Korea from the missile launch. Things went into a hot state when Trump threatened Kim Jong Un to expect a fire and Fury is there happens to be such a missile launch which saw an imminent impact on Guam- US Military base in the Pacific region. But there didn’t happen anything of the similar kind, the President’s words didn’t find any place in a reality. The world felt like the war is imminent with Trump’s harsh threatening words. But the North Korean leader stepped back involving in International diplomacy without actually getting into a potential war saved the situation. The aim of Trump was Denuclearization, and by mere bluffing, he seems to achieve it at the end of the fiasco by meeting Kim Jong Un.
President Trump soon realized a couple of months before that the Country has been undergoing huge losses with a high amount of trade deficit with China. So Trump started imposing tariff duties on China goods exported to the US, with an aim to promote the domestic trading section of the nation. Trump had already imposed tariff duties on $50 billion Chinese goods. He adds more $200 billion in tariff duties to the imposition list to Chinese Imports which will come into effect from 1 January 2019. China has also retaliated with tariffs on the US, catalyzing the trade war between the two countries. China has warned to impose duties of more than $60 billion on US imports if more tariffs are imposed.
This concludes for a tit-for-tat between the two.
Trump is trying to pressurize/bluff his opponents to achieve his goals.
NAFTA deal – A deal signed by 3 countries viz. Canada, US, and Brazil. Now, Trump feels that the other two partners of the deal are getting more benefit than the US with this deal since inception. This he wants not to persist again. He hence wants negotiation over the older terms of the agreement. The trio deal was dismantled. Brazil finally after many deadlines agreed with Trump as they are a developing nation and is reliant on the Developed Nations to enhance self-growth. But rather Canada remained reluctant for a long time. However, Canada irresistible to its Currency fall, Overall Canadian Catastrophic economy and many sort other macro pressures too.
Donald Trump in this way has been/is playing with countries around the World, bringing them under pressure, stabbing them with harsh words, threats, in order to revert the opposite party/ country to abide by his terms and conditions.
Trump withdraws from Iranian Nuclear deal signed in 2015 during Obama’s time. The President allegedly accused Iran on developing Nuclear weapons and which will have a potential threat to the US. Iran supplies Oil cheaper as compared to other Oil Suppliers. Now the Trump has imposed many sanctions on Iran’s capabilities to trade with the US and its other related countries. Each week the sanction numbers are observed to increase drastically. US has clearly said that If a country is involved in trading with the US and also with Iran, the US can cut relations with that country. They are also being strongly pressurized by the US. A certain damage on the Iranian Economy is imminent. They have been facing lowering of Currency rates, an increase in unemployment which is the current Iranian inside story.
Oil prices have been touching heights, crossing $83 per barrel. This is particularly because of the pressure it is applying on Iranian oil supply. The OPEC is currently facing a huge demand for crude, hence has the high price charged on the commodity. Analysts are estimating for the price of crude oil to reach $100 per barrel.
But we believe rather than reaching the $100 level it may vary sooner come down to $60-$70 range seeing the Bluffing Style of Trump.
He pressurizes the opposition by giving false threats. He does this only to attain his particular goal whatever favors him. He wants negotiation from Iran at the end, over its trade deals with Iran. He always wants to be in the front line of profit in every transaction done.
We can hence expect the bubble to burst very soon, and Iran complies with US’s terms. Because Iran may understand that if it halts its Oil business, it may take months to start it again further worsening the whole scenario. But if Iran steps back and comes into an agreement like North Korea, Brazil, and Canada, will bring Iran back to Oil Supplier Industry, filling the demand gap and hence lowering of Crude Oil prices. This will also save Iran from falling into an economic crisis.