Oil Bulls Remain in Charge for Now

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Benchmark oil prices are poised to make fresh multi-month highs this week amid improved economic data in the U.S. and China, according to CNBC's latest survey of market sentiment. However, a minority of the trade are questioning the rally, arguing the move higher is overdone and Monday's pullback in prices may deepen.

U.S. crude slipped on Tuesday to trade near $96 per barrel as traders booked profits on renewed euro zone worries following signs of political uncertainty in the troubled region, while a slightly firmer dollar also weighed. U.S. crude futures have gained for the last eight consecutive weeks, its longest winning streak since 2004.

More than three-quarters of those polled - or seven out of nine respondents – expect prices to rise this week; one forecast prices will hold steady at current levels and one expected a retracement.

(Read More: Why This Week Will Be a Bad One for Oil)

"Every asset has driven relentlessly higher since late last year and almost every bear I know has capitulated," said Kirk Howell, partner at Spy Ridge Capital, adding that he has revised his 'neutral' call to 'modestly bearish.' "We may continue higher but after six straight weeks up there's a larger risk of at least a $2 to $4/barrel pullback."

Investors have become "too comfortable with the low volatility world central bankers have worked to create," Howell added. "And while the most likely outcome is that this dynamic continues, it's worth preparing and hedging for a shift in risk perception if a catalyst appears. It has never been less expensive to do so."

Changes in the capacity rates of the Seaway Pipeline - which connects the Cushing, Oklahoma, delivery point for the U.S. oil futures contract to the Gulf Coast refining center - may prove a wildcard for the market.

Seaway's "capacity looks set to remain limited until the fourth quarter of this year," noted Eugen Weinberg, senior commodity analyst at Commerzbank. That would be bearish for prices since it allows less crude oil to be drained away from Cushing.

(Read More: US Oil Output Hike: What It Means for Gulf Producers)

Irrespective of this, money managers are betting on further increases in the WTI price, Weinberg said.

In the week to January 29, net long positions in U.S. crude futures climbed for the seventh consecutive week to reach 207,054 contracts, their highest level since March 2012.

"That said, the news about the Seaway pipeline could prompt speculative financial investors to withdraw in part, thereby putting pressure on the WTI price," Weinberg said.

U.S. crude futures have yet to re-test $100, a level that has proven tough to crack. Still, prices shy of $98 a barrel are at their highest in four-and-a-half months, raising fears of costlier retail gasoline prices acting as a tax on consumers - a headwind that may stifle the economic recovery.

"Short term, if it spikes up, it's going to matter...then there's more of a tax" on consumers, said David Mann, head of regional research, Asia at Standard Chartered Bank.

(Read More: Iran Oil Exports to Asia Fell by a Quarter in 2012)

Fear Premium

The average U.S. retail price of gasoline rose 13 cents over the past two weeks to $3.42 per gallon, the Associated Press reported on January 31. The average price for the month of January was $3.32, the second highest January average ever, although five cents cheaper than last year's record. Retail gasoline prices have risen for 14 days straight, according to the American Automobile Association (AAA).

Though the 'sticker-price' shock of higher fuel bills will impact U.S. consumers in the immediate term, the expansion in domestic production from shale oil fields such as the Bakken formation in North Dakota will in the long term limit any move higher in gasoline prices, market watchers said.

High oil prices will become less of a problem as the U.S. "heads towards energy independence," Philadelphia Trust Company's Mike Crofton told 'Squawk Box' on Friday.

(Read More: Union Pacific Rides the Shale Boom: Exec)

Despite continued political instability in the Middle East and North Africa and fears over supply disruptions, many argue that the price of Brent crude already reflects the 'fear' premium and there is little further upside to expect barring any physical stoppages to oil flows.

"In the past, events like we have had over the last few months would normally be the type of events that would shock us and jolt prices," said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

"Now we remain largely unmoved because the markets have already to a large extent priced the risk of the sad events that we have seen in part because global supply is not as tight but mainly because the markets expect a certain amount of headline risk," he said.