Oil prices will likely reverse last Friday's fourth-largest daily gain on record wiith traders saying the surge is unlikely to signal a major shift in the negative trend, according to CNBC's weekly survey of oil market sentiment.
Friday's broader market rally after a deal by European leaders to stabilize the region's banking system sparked off a wave of buying activity in the oil pits as funds scrambled to cover short positions, or bets that prices would fall. The activity sent London Brent crude oil futures surging more than $6 a barrel to near $98 while U.S. light, sweet crude jumped by more than $7 to settle just below $85 a barrel — the fourth largest daily gains in dollar terms since the contracts were launched.
But both global benchmarks posted their biggest quarterly declines since the fourth quarter of 2008 due to anemic demand, ample supply and a slowdown in business activity in Europe, the U.S. and China.
This week, exactly 40 percent, or four out of the ten respondents in the sample group, expect prices to fall while three believe prices will rise and three say they will remain unchanged.
"The European leaders finally proven they can exceed expectations and bought more time by addressing the immediate problem with Spanish banks but a litany of issues still remain," said Kirk Howell, Chief Operating Officer of SunGard's Kiodex, who has a 'neutral' view in the short term.
"Last week's break lower followed by unexpected action in Europe and the jump higher Friday very likely caught many participants on the wrong side. Having a sharp gap move on the last day of the quarter led to aggressive short-covering and the 7 percent move. However, we should still remember WTI still dropped 17 percent on the quarter. I would be cautious to call a major change in direction just yet."
Risk events this week, including Thursday's European Central Bank meeting, the June Non-Farm Payrolls data on Friday from the U.S. and further details from last week's deal struck at the European leaders summit would keep cyclical commodity markets on edge and may limit any follow-through buying interest, Howell added. "We will be working to establish a direction given the news."
—By CNBC's Sri Jegarajah