Oil Diplomacy Blog: Global Perspectives on Foreign Oil and Gas Issues

Analyst says 'sentiment and speculation' drives price rise

According to analyst BMI, there are grounds for optimism in oil market terms, in spite of continuing demand weakness, generous inventories and OPEC production that has failed to fall to the organization's target level.

It said the most positive factor is the stabilization of demand forecasts, which points to a bottoming out of bad news. Gasoline prices have soared in recent weeks as the US 'driving season' gets under way.

The US dollar has weakened, investor activity has picked up and there is a growing belief that economic recovery may be just around the corner.

“Our above-consensus oil price view, which we have held since January, now looks secure and risk has moved to the upside. Our next full quarterly review, due in July 2009, is likely to revise upwards our 2009 assumption and we expect to see other forecasters becoming more positive,” BMI said.

However, the analyst continues to sound a note of caution.

Much of the ‘good’ news has already been discounted by the steep gains seen in the oil market during May and June. US and European crude prices above $70/bbl are based more on hope than reality.

As a result, BMI said that “there is little real evidence yet of a lasting improvement in the supply/demand balance. This suggests that market fundamentals are being swamped by sentiment and the renewed speculative appeal of the oil market.”

Your view?

Labels:

posted by: noreply@blogger.com

090701 :Analyst says 'sentiment and speculation' drives price rise

Post Comment

No Comments

Post Comment

Eric Watkins
OGJ Oil Diplomacy Blog
by Eric Watkins

Eric Watkins joined Oil & Gas Journal in 2001 as Middle East Correspondent and now serves as its Oil Diplomacy Editor, drawing out the industry’s political implications. His column Watching the World appears weekly in Oil & Gas Journal, while his news articles appear daily on Oil & Gas Journal Online. Eric’s work is based on his experience as a correspondent in the Middle East, Europe, and Central Asia. He lived in Saudi Arabia, 1981-88; Yemen, 1989-94; the UK, 1988-89 and 1994-2000; and Cyprus, 2000-04. Additional assignments have taken him to Africa, the Arabian Gulf, the Caucasus, and Central Asia.

Previous Posts

Archives

Advertisement