- Oil firmed to $72 a barrel on Thursday after the International Energy Agency raised its estimate for 2009 oil demand, adding to signs the fall in consumption may have bottomed out.
- World oil demand will contract by less than previously expected this year, the International Energy Agency (IEA) said as it raised its 2009 forecast for the first time since August 2008.
- Olivier Jakob, oil analyst at Petromatrix, said markets were now in a phase of identifying green shoots of economic recovery. The IEA report "will likely be taken as an additional green shoot," he said.
"Consumption may have bottomed." "World oil demand will contract by less than previously expected."
Sure this is a positive, but it shouldn't be misinterpreted as some kind of strong resurgence of demand. Last year, when prices ran up to around $150/barrel, there was much more demand, and the economy was much stronger. Even then there was a ton of speculation, as well as the weak dollar contributing. Right now we have speculation, the weak dollar, and maybe a bottom in demand.
Yesterday, I was reading Todd Sullivan's blog, and he had a link to a video about this same discussion. The analyst pointed out there is an "endless bid" for oil which started last year. Everyone wants oil to be a part of their portfolio, and this contributes to prices rising. If you look at the oil etfs (USO, DXO etc.) they have seen major inflows of funds. Strong economy or not, most people believe that oil prices are going higher, and want to be a part of that. Anyway, its worth a look.