Fed Stimulus, Mideast Turmoil to Feed Oil Price Rally: Survey
Oil prices are likely to extend a stimulus-led rally this week, while fears that turmoil in the Middle East will disrupt oil supplies are also bullish for energy markets, CNBC's weekly survey of oil market sentiment shows.
All ten respondents expect prices to climb this week after oil rose on Friday but settled below four-month highs hit in the session, underpinned by measures unveiled by the U.S. Federal Reserve on Thursday to bolster the economy.
Focus was also on developments in the Middle East. Israeli Prime Minister Benjamin Netanyahu on Sunday called for the U.S. to establish a firm "red line" that Iran's nuclear program cannot cross without risking a military response, despite White House resistance to laying down a marker.
Libyan leader Mohammed Magarief meanwhile said on Sunday that about 50 people have been arrested in connection with the deadly attack on the U.S. consulate in Benghazi last week, which he said was planned by foreigners linked to al Qaeda.
"Looks like we are going higher," said Mark Waggoner of Excel Futures. "Tensions are building."
Front-month November Brent crude rose 78 cents to settle at $116.66 a barrel on Friday, after reaching $117.95, the highest level since May 3. Brent gained 2.1 percent for the week. U.S. October crude, up 2.7 percent for the week, rose 69 cents to settle at $99 a barrel. U.S. crude reached $100.42, its first time over $100 since May 4, when it touched $102.72.
Despite the optimism over the short-term outlook, some still expect the risk of a retreat in prices as markets refocus on structural weaknesses persisting in the global economy. Many market watchers believe prices have risen to levels that are not justified by the fundamental supply and demand picture.
"Friday's price action did look over-extended as oil traded to a high of $100.40," wrote Jonathan Barratt, CEO and Founder of the global markets newsletter Barratt's Bulletin. "So it was a quick trade as we sold the position at $100.17. Keep an eye on the inventory data for builds as they are showing that there is no real uptick in demand."
Money managers raised their net long U.S. crude futures and options positions in the week to September 11, the Commodity Futures Trading Commission said on Friday.
ANZ analysts noted elevated prices could create "demand destruction" in the market. "This week, prices could be vulnerable to profit taking, with a lot of upside from the U.S. Fed's QE3 response already priced into the market," ANZ said in a report published Monday, referring to the Federal Reserve’s third round of quantitative easing unveiled last week.
"U.S. futures data showed a 4 percent build in non-commercial net long oil positions, the highest levels since late February," ANZ said.
—By CNBC's Sri Jegarajah