Oil and Demand Destruction

The ratio of Oil prices to World GDP has reached to a record level. Its a classic case of demand destruction where these high prices would end up hurting economies and killing the price surge. Moreover High prices would also make the oil producing countries to produce extra and glut would again destroy the prices. But right now its difficult to guess when and how...

Source : FT

Crude Oil overbought

it seems revolution has a cost and this time its $ 120 / barrel. But will we sustain this massive rally in oil prices. technically, if WTI remains above $ 93 , the rally is here to stay but we r still not sure of when and how much. Another view is from Bespoke investment who comes comes out with a very interesting piece of data which suggests that oil seems overbought and it might spike further right now.

"the price of oil closed more than three standard deviations above its 50-day moving average on Wednesday. This is a feat that hasn't been accomplished in more than ten years, and going back to 1983, it has only occurred in eight other periods. In the table below, we highlight the first day in each period where this occurred as well as the commodity's performance over the next week and month. In more than half of the prior periods, crude continued to rise, averaging gains of 1.07% over the next week and 4.03% over the next month"

Source - BespokeInvestement

Oil at $ 200 - Nomura

So economists have started crystal ball gazing and predicting. last time it was Goldman Sachs who made a self fulfilling prophecy and this time around its Nomura.

" If the situation in the region were to worsen in a way that it encompasses other oil producing countries as well in the future, the oil supply-demand balance could change very rapidly. In particular, if the crisis were to spread to Saudi Arabia, (possibility of which is quite low at present according to our Senior Political Analyst Alastair Newton), there can be real threat to global oil production, the impact of which is impossible to ascertain on prices. In addition, the recovery in Middle East oil production would depend upon the extent of damage to oil infrastructure during the crisis and the extent of restoration of stability. Overall, we do not rule out the possibility of oil prices touching record highs in excess of US$200/bbl in the near term, should the MENA crisis continue to spread over the coming weeks " .

read the full report

Nomura MENA