The Week In Hindsight, 31 January 2014

The Brent and WTI Crude spread widened during Friday’s trading after both benchmarks extended their earlier rally well into this week.

Despite the ongoing turmoil in emerging markets, resilience in oil prices prevailed for the week until the European benchmark, Brent Crude, failed to break through overhead resistance at $108 per barrel for the second time and consequently fell back toward the $106.40 mark ahead of the market close.

Regardless of near term technical barriers, the 2014 outlook for oil prices remains positive at present. This is as growth expectations for developed markets over 2014 remain bullish, while output figures continue to surprise to the upside supported by higher confidence levels among businesses, consumers and investors.

Such growth and confidence dynamics are supportive of higher oil prices alone, without the supply side pressures that continue to exist as a result of ongoing conflicts across various corners of the globe.

In summary, we currently see strong support for both benchmarks at the January lows, while the near term direction of prices is expected to favour the upside. For these reasons, our Q1 outlook for oil prices remains in place and unchanged.

Brent Crude and WTI Overlay