Since I sold oil on Monday, the price has shot up by another 5 %. It's now up 12 % in barely one week. The futures curve has also flattened, and now only prices in an increase of 10 % until year-end.
At the same time, there is ongoing news flow about continued weakness of demand, and according to this article (hat tip Naked Capitalism), the world is quickly running out of storage capacity for all the excess oil that is being sold by oil-producing countries. And the FT (print edition) tells us that oil tanker rates continue to fall.
According to the WSJ, the IEA expects 2009 oil consumption to drop by 3 % compared to last year. And Bomlat has a table on US oil consumption, which shows a massive Feb 2009 drop of 13 % as compared to two years ago.
So why is the price up so sharply?
It seems that the market is interpreting vaguely positive economic data from the US (or should I say "somewhat less negative economic data"?) as an indication that the world economy is recovering, and oil demand will begin to increase.
I'm not sure what to think. If demand starts to increase, I'm convinced that oil will go up very substantially, and quite quickly. But I'm not exactly sure where demand will go in the short run.
(This is an update on this post.)