Oil prices received a boost yesterday after Saudi Oil Minister Ali Naimi suggested consuming countries are happy with oil between $70 and $90 a barrel, raising the price ceiling by 10$ from the previous range of $70 – $80.
Oil received an additional boost following the release of better than expected manufacturing data from the U.S and China. Oil has advanced this year despite rising inventories as investors bet demand will increase as global economic substantiates. It appears that prices are heading back to around $85, with further room to appreciate.
One major block in crude’s resurging rally is the outcome of the U.S. Federal Reserve’s policy meeting on Tuesday and Wednesday. It is widely expected that further quantitative easing measures will be announce in order to recharge the lackluster U.S economic recovery. The only question is the size of the second “stimulus”. Oil prices tend to have an inverse relation as oil is denominated in U.S. Dollar and a weak currency makes the commodity cheaper and therefore more attractive to investors. If the scope of the intervention is smaller than expected it is likely the greenback will regain some strength, putting pressure on oil prices.
Tomorrow’s release of U.S inventories is expected to show an increase of 1.7 million barrels last week, after a 5 million barrel jump the previous week. It seems, however, that despite the markets oversupplied, prices remain moderately steady. A bigger than expected increase, none the less, will likely suppress oil prices in the short term, pushing them back to below $82.
