After falling in early Asia trade, oil prices firmed up on Wednesday morning ET and extended their rally for nine straight days—the longest streak of consecutive daily gains in two years.
The supply curbs from OPEC+ and Saudi Arabia, the weaker U.S. dollar, and the risk-on sentiment continued to stoke the rally in oil prices. The deepening backwardation in both benchmarks is further incentivizing long-position investors who hope to take advantage of a high roll yield when they have to roll their futures contract to the following month.
In addition, the American Petroleum Institute (API) reported on Tuesday a draw in crude oil inventories of 3.500 million barrels for the week ending February 5, against analyst expectations of an inventory build of 985,000 barrels for the week. The EIA is set to release its inventory report later this morning.
Amid the longest winning streak in two years, analysts and industry professionals have already started to warn that oil appears overbought and the market has gotten ahead of itself.
Momentum indicators are increasingly pointing to a market in need of consolidation, Saxo Bank said on Wednesday.
“The +50% rally since November now also driving speculation that producers will try to produce more crude into a market where Saudi-led supply tightness has been the main supporting factor,” the strategists said.
Torbjörn Törnqvist, chief executive at one of the world’s largest independent oil traders, Gunvor, told Bloomberg last week that oil prices were unlikely to soar much above the $60 per barrel mark, considering that this price level would incentivize a lot of oil supply, including from the United States.
Amrita Sen, chief oil analyst at Energy Aspects, doesn’t rule out $100 oil next year, but she also believes that in terms of prompt fundamentals, the market has gotten ahead of itself, “because right now demand is still relatively weak.”
By Tsvetana Paraskova for Oilprice.com
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