I'm sure there have been lots of head-scratching around price action in the oil space. US crude oil is still over-supplied, and Russian production continues to bewitch the bulls.
And likely the best commodity signpost, Chinese demand for copper has yet to inflect -- in fact, it remains objectively weak. Most order book surveys at the third-week post-CNY, or the week ending on Feb 10, suggested that on-the-ground demand has yet to show signs of recovery beyond normal seasonality, suggesting a potential risk of delayed recovery for commodity prices, including oil, in March and possibly into Q2.
Even though we never really believed oil and commodity markets were that overly owned, there was virtually no one with a bearish stance either, as most continue to hold the view that pent-up demand in Q2 amid more normalized Chinese consumer operating conditions will hold sway.
With an appreciation for how painful this has been for the bulls, I suspect the path of least resistance is still higher from here, and the structural thesis echoed by numerous commodity analysts remains intact. But that doesn't mean another fall below Brent's $80 bbl in Q1 is out of the question.
In the meantime, a possible hawkish repricing of the Fed curve, recession concerns in massive oil-consuming economies, global inventory gluts, and absentee organic growth in China are providing the near-term overhangs.
We expect oil and gas demand to increase in China but are a bit more cautious than most due to property deleveraging that may stunt the consumption recovery. Still, the wild card remains US demand and whether the biggest major oil-consuming economy slips into the recession abyss.