Can oil's rally last?
Physical tightness and geopolitics suggest so. But price threats are lurking
Everything looks bullish right now. Physical markets are tight. Demand is stronger than expected—Gulf Opec producers had thought Q4 would be much weaker. OECD stocks continue to fall. Oil is being drained from floating and onshore storage. The excess inventory is now mainly in the US, from which exports are soaring. The futures curve, in backwardation over the next six months, reflects the underlying shift in the fundamentals. The market seems to expect Opec to extend its cuts beyond the end of Q1 until end-2018. Geopolitics is the bull-shaped figurine on top of the cake. Some supply interruptions have already occurred: exports from northern Iraq have been cut several times in recent weeks a
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