Oil rises 'go against fundamentals'

20/05/2009

The recent rises in oil prices are a false indication of market health returning, it has been claimed.

According to the Financial Times, even though there have been a number of price hikes in trading over the past couple of weeks, market fundamentals do in fact remain weak.

Currently, prices for crude oil hover around the $60 per barrel level, while heating oil contracts are around 150 cents per gallon.

It is not the key market drivers that are behind the increases, rather it is investor flows and predictions about long-term demand, a number of leading figures from the oil trade told the newspaper.

"The move from $50 to $60 was not based on fundamentals," an unnamed executive from one bank that trades in physical oil told the newspaper.

Prices should fall back to about $50 per barrel in order to be in line with the market fundamentals, some traders believe.

However, Algerian energy minister Chakib Khelil recently argued that prices should settle at a level of around $70 to $80 per barrel.