Momentum has definitely shifted, and the dive below $100 in mid-April was short-lived. Without global economic regions showing signs of growth, underlying demand for oil was always likely to begin drying up, and hence cause the price to test these low levels. However, with the Fed asking itself if the US recovery is solid enough to withstand the beginning of the end of quantitative easing, the markets have anticipated an increase in demand.
The flow of US economic data, although not likely to set the world on fire, has broadly been improving. The underlying sentiment in the markets is that the US has managed to maintain the fragile recovery begun at the tail end of 2012. The trend from 2010 onwards has been for an ever-decreasing unemployment rate in the US, and fundamentally this leads towards higher fuel consumption.
The other major factor, in addition to demand, is the strength of the US dollar. This water has become particularly muddy, with the markets responding to the Japanese prime minister’s third tier of action to weaken the yen. By default, the dollar has seen weakness returning after such a prolonged period of indirect support. Commodity traders will be watching cautiously to see how this currency cross develops.