BMI has just issued its fourth quarter Global Oil Market report, saying that it is continuing to sound a note of caution regarding the sustainability of the recent rally and the potential for further gains during the second half of 2009.
“Several cracks have been appearing in the fragile foundations of the oil market recovery,” BMI says. “Oil prices may have taken a well-earned break from their relentless second quarter charge, but a mood of unrealistic optimism still permeates the exchanges and trading floors.”
That sounds like pretty damning criticism, but BMI backs up its words by saying that “there remains little evidence of demand improvement, while stocks remain high and supply is on the rise.”
It appears to be a case of "papering over the cracks," BMI says, rather than waiting for a "permanent fix" to the many problems facing crude and refined oil products.
“Our June 2009 update acknowledged that things have stopped getting worse, even if they have not yet started to get better,” the analyst said. “This represents important progress, but not enough to justify the strength we have seen in the crude markets since the spring.”
Warming to its theme, BMI said: “We warned in June that a sustained recovery in prices would be dependent on tangible signs of demand recovery and continued supply management. Our last update suggested that such evidence might not become available in 2009.”
BMI continues to advocate caution and point to the risk of a third-quarter decline if market fundamentals do not improve. It is “not convinced that bullish sentiment alone is enough to support a continuing rally.”
This is a fairly terse view of things. What’s your take? Is BMI on or off the mark when it comes to these predictions? Are traders really in a mood of “unrealistic optimism”?
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posted by: noreply@blogger.com
091021
:Analyst cautions against "unrealistic optimism"
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