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Tiger Cub Economies Part 2: Foreign Exposure

This is the second installment of a 4-part series examining the 5 Tiger Cub Economies, and the fundamental factors used to determine the best country ETF to invest in. Part 1 covered demographics and the middle income trap. Part 2 explores the effect of higher energy prices, financial market disruptions, ongoing slowdown in China and US protectionism.

Rising Price of Oil

Analysts are calling for the price of oil to rise moderately this year from the current $55/bbl based on growing world demand and OPEC cutbacks. Counterbalancing the OPEC cutbacks will be production increases in the United States, Canada and Brazil. If OPEC compliance to the 6-month phase-in of cutbacks is adhered to, the difference between global demand and supply suggests a stock draw of 0.6 mb/d. But keep in mind that the oil stock drawdown is starting from a great height.

In the United States, crude inventories climbed by 13.8 million barrels in domestic crude-oil supplies for the week ended Feb. 3. Analysts polled by S&P Global Platts had forecast a much lower surplus of 2.5 million barrels. The surprise surge was apparently due to imports, not lower demand. The average shipping time from the Persian Gulf to U.S. Gulf Coast is 47 days and had not responded to increased U.S. production. The U.S. oversupply should slow by mid-March.

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by Steve Auger