Macro Outlook – Price weakness on the cards

Oil prices have been bid higher since the early October lows by concerns about possible supply interruptions and falling US inventories. Major supply interruptions, including an EU embargo on Iranian imports, however, are very unlikely while the drawdown in US inventories is from a high base. If supply fears prove grossly exaggerated, as we suspect, and the European debt crisis persists, as seems likely, a renewed period of price weakness is on the cards.

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