Oil prices have joined the global markets rally on expectations worldwide economic recovery is triggering demand growth. While there are sprouts of oil demand recovery, oil consumption has at best stabilized in 2009 and is expected to start showing year-on-year positive growth in 2010. The global recession destroyed a significant amount of consumption and it will not be until at least 2012 when oil consumption returns to pre-recession levels. Most of this growth is expected to stem from developing countries. For now, the market appears to be adequately supplied on the back of sufficient spare output capacity and brimming inventories. So, do oil prices reflect a balanced market? There are other notable factors exerting a great deal of influence on prices: excess liquidity, a weakening US dollar, inflation expectations, and geopolitical risks. All these contribute to short-term price fluctuations.
Eduardo Diaz, CFA is a director at Infin Management Limited since 2008, a company which provides financial hedging solutions to fuel-intensive companies and end-users in the United Kingdom. Prior to that, he spent many years in the financial industry working in both New York and Madrid. His career has evolved in the areas of Private Banking, Capital Markets, Investment Management, and more recently Energy Risk Management. He has worked at JP Morgan, Sungard, Banco Bilbao Vizcaya Argentaria (BBVA), and has led consulting projects for Harvard Management Company and Barclays. Eduardo holds a BSc from Rutgers University, USA, and an MBA from Instituto de Empresa (IE), Spain. He has completed finance coursework at New York University, USA, and became a CFA Charterholder in 2005.
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