NEW YORK: (Commodity Online): After a long slumber, oil prices have attempted a breakout to the upside, with the value of the OPEC basket reaching a nine-month high above $114 per barrel. Given the flow of more positive macroeconomic data and the drift of several geopolitical situations towards escalation, the path of least resistance for prices is still to the upside.
The overall state of global oil market fundamentals appears to be tighter than implied by recent US oil data releases, the latter of which also appear to be out of line with US macroeconomic data releases. In our view, there appears at this moment to be a sharp and unexpected demand surge from both Asia and the FSU, to which a severe European cold snap has added to create tighter prompt market conditions than either expected, or is implied by the US oil data.
The run of very weak US oil demand indications has continued, with February starting with a demand fall of more than 1 mb/d just as has been recorded in the provisional November and December estimates. Cushing crude inventories have built for a third week and are expected to move higher seasonally over the next three months.
Source: Barclays Capital Commodities Research
