Oil rebounding, up on the year

9 February 2015, 17:58
Andrius Kulvinskas
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Analysts at JP Morgan explained that Oil prices have rebounded strongly over the last week and are now up on the year. 

"We have been short Brent since the beginning of November (GMOS, Nov 5) on the view that there was an excess of supply over end user demand in the oil market driven by higher than expected Libyan and US production. OPEC would not cut production as they did not want to lose market share and so the supply adjustment would need to come from non OPEC, with the most significant contributor being the US shale industry." 

"We now see signs of a significant supply response, as a much lower US rig count means future production expectations have had to be lowered, and increased demand due to the very steep contango (upward sloping curve) that makes it profitable to buy physical oil and store it while simultaneously selling it forward. We take half profit on our short in Brent."
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