Oil may be overshooting the equilibrium price for the oil industry, which is centred on the current anchor near the industry’s long-term marginal cost of production and support of $55 per barrel (/b), a report said.

A confluence of vaccine optimism, an easing of Covid-19 cases and fatalities, greater US stimulus, a more upbeat IMF assessment of the global recovery, stern OPEC+ discipline, Biden’s early bullish energy actions and a weaker US dollar are powering oil markets forward, said Mitsubishi UFJ Financial Group (MUFG), a Japanese bank holding and financial services company in its latest Oil Market Weekly.

“However, we believe a pause and reversal is now on the table. The rapid ascent in oil prices will entice profit taking and propel hedging strategies amongst producers in a bid to cool the market, in our view. Technical indicators – both the 14 day relative strength index (RSI) and Bollinger bands – indicate overbought and overstretched levels, signalling the rally may fade,” the report said. - TradeArabia News Service