Crude oil is currently trying to push back towards the $75 per barrel price handle aided and abetted by equity markets which have managed to regain their equilibrium following last week’s volatility resulting from Obama’s banking regulation proposals. Oil prices have also been helped by a modest weakening of the US dollar and the return of some cold weather. However, for the time being it is the equity market which is the prime driver of oil prices as their recent 5% plunge has resulted in a flight out of the long side. Whilst China’s recent monetary tightening decision & uncertainty surrounding the reappointment of Ben Bernanke & Fed policy in general (although this week’s meeting should give us some idea) have all contributed to a more risk adverse mood in the market oil traders need to watch whether the dollar continues to strengthen, particularly against the euro.
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