Kelly Eckhold: Westpac Chief Economist on oil prices dropping amid Iran deal negotiations

Oil prices fell significantly throughout last week as discussions regarding an Iran deal continued to take place.

Prices are down around 8 percent for the week with Brent crude around $91 a barrel.

Westpac Chief Economist Kelly Eckhold says rumours regarding an imminent Hormuz opening agreement caused prices to drop on Friday, but things aren't fully stable.

"Mediators had sent a proposal to Trump for an agreement and then noted on his Truth Social account that he was going to make what he called a 'final determination' on the Iran issue. He was in this meeting, but we weren't that lucky." 

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Episode Transcript

Speaker 1 (00:09):
You're listening to a podcast from News Talk ZEDB. Follow
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Speaker 2 (00:16):
Let's talk money and Economics with Kelly Echold, who is
Westpac's chief economist. Thank you for joining us this holiday.

Speaker 3 (00:22):
Kelly, good morning.

Speaker 2 (00:24):
It's day ninety three of the Middle East War. But
the all places are going down.

Speaker 3 (00:30):
Yeah, old groundhog day again. I mean, the tendency has
been that we get to peak world peace around about
the time of the closing of the stock markets on
Friday US time, and then shortly after that thing start
falling apart. And this is pretty much what has happened
this weekend. Also, we've had a big fall in oil

(00:51):
prices through the last week, and especially on Friday because
there were stories of an imminent Hall Moves opening agreement
that was going to be agreed. You know, oil's down
eight percent. I think for the week, Brent cruise around
ninety one dollars a barrel, so certainly prices that have
stayed there. Then petrol at the pump here ninety one,

(01:12):
petrol below three bucks in our futurech I'm sure a
lot of people like mediators had sent a proposal to
Trump for agreement, and he had noted on a truth
social account that he was going to make what he
called a final determination on the Iran issue. So it
was in this meeting, but we weren't really that like.

(01:34):
He didn't make a final determination. What he actually did
was he left without making a decision to went to
the golf course. An article later on from leaked by
officials of the New York Times explained what had happened.
They offered a deal where the US would lock a
few billion of frozen Iranian funds in return for dropping

(01:56):
the blockade and sanctions, but an Iranian harassment of his
bowler and Lebanon was supposed to finish with discussions on
the nuclear program later. But Trump doesn't want to do
that deal. He can't do that deal because that's pretty
much the same deal he excoriated Obama for doing ten
years ago. So he's basically sent it back to them.

(02:21):
He said to Ara Nana, I need a lot more
commitment out of you before I give you any money.
The IGC can't accept won't accept this, so they'll sit
on this for another week. In fact, on Saturday, they
did a missile attack of a Kuwaiting Air base destroyed
if some US drones who heard a few service people.
So it's not really sounding like we're on the way

(02:42):
to world peace really after all. So we're basically back
we started, I think, And I guess it's interesting to
note that the Chevron CEO had an interview in the
press yesterday and he basically said that given the blow
level of inventores now these oil places are going to
have to go a lot higher because everyone's running out

(03:05):
of oil for their refineries.

Speaker 2 (03:06):
Yeah, the inventories are very low. Now. This makes a
very interesting situation for Anna Bremen and the Reserve Bank
because we've got at the moment lower oil prices, but
they could go up higher. We've got to improved consumer
and business confidence, and we've got all the speculation about
July and the possibility of raising the ocr So what's
down are going to make of all the developments over
the weekend?

Speaker 3 (03:27):
Well, I mean that's the que question. I mean. She
had a full scale insurrection on her MPC last week.
The three external members ganged up against her and demanded
a hike. Her internal colleagues would try to mount a
reguard action by voting for a whole but she needed
to basically use both her own vote and their casting
vote to overwhelm the push for a rate hike. It's

(03:49):
pretty extraordinary, I reckon, because you have to remember that
why do we have these external NPC members. Were there
supposed to be the check against internal groupthink, and there
are also supposed to be the people that are in
better touch with the economy as well, because the usually
business people. Bremen doesn't want to tighten because she thinks
it's too soon to tell whether there's going to be

(04:11):
any second round inflation effects and there's a bit of
downside risk of the economy. I think that's probably fair
enough to some extent. But you know, as you've said,
the fall and oil prices really does kind of like
put in in the balance exactly how high inflation is
going to go. And we did see business and consumer
confidence rise on Friday, bet as people have noticed the

(04:34):
lower oil prices and petrol prices. But you know, with
those lower petrol prices that means the economy can come back,
so and we do have quite low interest rates, so
I just suspect it's going to be quite hard to
work out what they're going to do in July. Market
seem absolutely sure that she's going to raise rates. I'm
not so sure about that. I don't think she probably

(04:55):
really wants to. So yeah, it'll be very interesting to
seew it goes.

Speaker 2 (05:00):
If she doesn't want to end then still split. Of course,
she still has the casting vote in the staff vote
for her, So yeah, here we go a yes status quo.
It's quite uncertainty, Kelly hair Cold, I thank you so
much for your time today.

Speaker 1 (05:13):
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