24 February 2011 -
This note looks at the surge in world oil prices back above US$100 a barrel.
The key points are as follows:
- The global oil price has spiked above US$100 a barrel due to unrest in the Middle East, but oil price fundamentals are also strong.
- Expect a further increase in Australian petrol prices, possibly adding another 10 cents a litre to the average weekly price.
- Share markets were vulnerable to a correction and uncertainty surrounding world oil supplies appears to have triggered this in the last few days.
- While shares are vulnerable to further short-term weakness, our assessment is this is just a correction as global fundamentals remain favourable, and once the Middle East settles down again the cyclical recovery in shares is likely to continue.
