March 8, 2011
Sheraz Mian
Director of Research
With the economic calendar fairly quiet, oil will most likely remain center stage today, as has been the case the last few days.
Uncomfirmed reports that Moammar Gaddhafi’s inner circle may be looking for a way out of the growing impasse should have a moderating effect on oil prices today. But it is difficult to envision that scenario in the absence of a strictly enforced no-fly zone that disables his air force.
We will know for sure in the coming days only. But for now at least, the Libyan picture remains a source of uncertainty for oil prices.
Gasoline prices at the pump have risen more than 15% in the last two weeks alone. And given the typical ‘downward stickiness’ of fuel prices, it will take much longer for the recent price gains to unwind even if crude oil start coming down from current levels. With the summer driving season coming ahead, elevated fuel prices may start weighing on consumer confidence levels.
I expect oil prices to retreat as the Libyan situation stabilizes. But the air of uncertainty over the region in the wake of the ongoing unrest will keep oil prices volatile for awhile.
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