fxstreet.com 10 Feb, 2021 04:15 am

Time for a breather after recent rates volatility

Time for a breather after recent rates volatility
Market highlights Reflationary assets take a breather as investors reduce equity market risk after recent rates volatility API decrease won’t ...

5 million barrels of crude from US inventories; that print will not dissuade oil prices from heating up further as Brent goes "up, up and away", pushing through $61 and still climbing while floated higher by vaccine and stimulus balloons.Comments by Trafigura's co-head of oil trading, reported by Bloomberg on Tuesday, suggests real physical demand underpinning the market, which is the best signpost and the most pro-bullish reflection for oil prices as total order supplants any forward-looking glass view.As Brent prices rise above USD 60/bbl, there’s little reason to doubt that demand fundamentals will justify a further recovery in oil prices to long term equilibrium of USD 65/bbl and likely beyond by year-end as we’re just starting to rev up the reflation trade engines.Higher oil prices are also a boon for Malaysian fiscal position at US$60/bbl; this compares with the government's 2021 budget assumption of US$42/bbl for 2021 and US$45-55 for 2021-2.

But it might become more apparent that OPEC sees $60 as the low end of the price range that incentivizes sufficient new production capacity to the market offering attractive producer returns.By the same token, while inventories are dropping, OPEC+ keeps an unusually high production capacity from the market, mainly via the latest Saudi Arabia February and March production curtailment.

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