Speculation of future stimulus moves by the Federal Reserve and a snap of cold weather in Europe and North America have boosted crude oil prices to a 26 month high and their longest advance in a month.
On December 6th, oil for January 2011 delivery rose by $0.19 to reach $89.385 a barrel on the New York Mercantile Exchange, a price not seen since Oct 7, 2008.
“There’s been enough supportive economic news as of late to support the move higher, and the cold weather is helping,” said Tom Bentz, broker at BNP Commodity Futures Inc., referencing Federal Reserve Chairman Ben Bernanke’s indication that the Fed may be open to expanding bond purchases above and beyond the $600 billion QE2 quantitative easing plan announced last month.
Analysts have begun to see a trend of “backwardization” with contracts beginning in September 2011, where prices for future months are dropping lower than earlier months. Analysts at Commerzbank AG say this may suggest oil demand will begin to outpace supply in the second half of next year.
“Ninety dollars a barrel is now like a magnet that the bulls in the market want to break through,” commented Victor Shum, senior principal at Purvin & Gertz Inc. “These days, sentiment is so bullish that any bad news on the economic front can’t hurt the rally in oil.” Read more…