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Oil market looks overheated

Crude futures have been correcting lower on Monday morning after Friday's rally. By the time of writing, the Brent price was down 0.14% at $92.05/bbl, while WTI was off 0.55% at $90.14/bbl.

Over the past week, Brent rose 3% and WTI gained 3.6%, with both crude benchmarks exceeding $90/bbl on the London ICE at the end of the week. Prices are in retreat today, likely after Baker Hughes reported that the US rig count increased by 2 units last week. This is a small number, but it is noteworthy that such an uptick occurs precisely when Texas oil production is being reduced. Oil prices have remained lofty due to freezing temperatures in the southern states of the US. That said, overall the oil market looks overheated, after reaching new highs not seen since 2014.

In our view, the Brent price could soon trade within a broad range of $89.5-95/bbl. Today, Brent could pull back to $91.5/bbl.

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