After moving higher for 7 consecutive days the Santa rally in the ASX 200 index looked under threat, following this morning’s weaker opening.
Iran’s statement that it plans to increase exports by 500,000 barrels a day within weeks of sanctions being lifted is not good news for oil. It’s a reminder that the total amount Iran adds to the market this year is ultimately likely to be well above 500,000 barrels. Iran has also made it clear that it plans to cut prices to restore export market share promptly. If events unfold this way there is not likely to be much relief for oil prices until US producers cut production.
Iran’s aggressive stance on oil exports has led to selling in the energy and materials sectors and a weaker opening for the ASX 200 this morning. The fact that the index lost nearly 11 points due to real estate stocks going ex-dividend today has also been a drag on the market this morning.
Despite these negatives, the pre-Christmas confidence in other market sectors appears to have carried into this morning’s session, despite a weaker lead from US markets. With banks relatively well supported and investors expecting other domestic stocks to benefit from an improving job market next year, we may yet see the Santa rally extend through to the end of the year.