Nymex WTI crude futures settled just above $70 per barrel on Tuesday for the first time since November 2008.
The move higher was accompanied by a fall in the dollar index, marking a return to the dollar-oil negative correlation which had started to weaken over the last week.
Despite the rally, the market is still expecting Department of Energy figures to show a build of some 1.5m barrels this week. This hardly paints a picture of tight supply. What it does do, however, is potentially set the stage for a renewed storm over speculators’ influence on market prices, first seen during last year’s rampant spike to $147 per barrel.
A taster has already come in the shape of Michael Masters’ testimony to a US Senate Agriculture Committee last week, in which the hedge fund manager argued that another bubble in commodities was under way as prices were once again being determined by the trading desks of large Wall Street firms and not supply and demand fundamentals.
Related links:
A dollar-oil signal? – FT Alphaville
So who says there’s no oil/dollar correlation? - FT Alphaville
The coming oil-equity disconnect or the end of efficient markets theory? - FT Alphaville
Oil, the great inflation hedge – FT Alphaville