Bulls and bears, seemed to have matched in numbers and weight in the global oil market, as oil prices find a new direction every other day, only to be reversed the very next day. This has been the story in the past two weeks as uncertainty regarding the direction and the magnitude of oil price change has left the investors guessing.
Bearish sentiments had the better of global oil prices last week, as the gloomy global economic scenario prevented Brent crude prices to go further north. The worries multiplied after Germanys economic numbers also showed consumers pessimism in addition to the sickening Euro zone. The US dollar also continues to remain firm, which has somewhat kept the global oil prices in check.
The US has also hinted at increasing its stockpile to combat any significant surge in oil prices and the fear of rising inventory has played its role in keeping oil prices in a narrow band. Saudi Arabia, the worlds key oil producer has also jumped in, saying it would utilise its reserve capacity to ensure that oil prices do not behave abnormally and stay close to the Opecs unofficial target of $100/bbl.
That said, the bullish factors have not shied away either which can be gauged from a strong resistance of Brent crude price near $105/bbl, despite worsening global economic conditions. With expectations circling around the markets of Federal Reserves latest round of economic stimulus boosting the demand for oil, prices have stayed above $100/bbl and could well break the next significant support level of $115/bbl, which is another four percent away from the current level.
Some analysts believe that tensions in Syria and the likely imposition of a fresh round of sanctions on Iran will further augment global oil price. The Middle East tensions demand a higher risk premium according to some analysts, and if sanctions on Iran materialise, $120/bbl may not be that far.
Whatever happens next is anyones guess, but strong resistance from both the bears and the bulls suggests that the tug-of-war is likely to continue and oil prices may remain in the narrow band of 105-115 dollars per barrel in the near future.
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