Our house view remains bullish on crude to year-end - we expect prices to remain range-bound through mid-October, before trading higher as refiners demand for crude picks up and inventories start to draw down from current bloated levels. For further details, please refer to our Commodity Strategist Hussein Allidina's recent report "The Commodity Call: The Time to Buy Crude", published 6 September.

Fundamentals improving, inventories starting to roll-over
Inventories are not high due to sluggish demand - global demand is averaging c.87mb/d, only 1% below Q407 highs of 87.7mb/d - which has helped drive floating oil storage levels down to 18m lows. It is more supply that has surprised to the upside (increased OPEC, Russian and Chinese crude production, together with NGLs and biofuels growth). We are skeptical that positive supply surprises can be repeated, particularly with the (non-OPEC) new project pipeline thinning and argue underlying decline rates are still an issue. In addition, we have detected early signs that inventories - whilst still bloated in the US - are beginning to roll over globally.

Eoin Treacy's view West Texas crude oil more than doubled from its 2008 low but has been ranging mostly between $68 and $83 for the last year. It is currently testing the upper side of this congestion area and a downward dynamic, sustained for more than a day or two would be required to question potential for a successful breakout to new recovery highs.

Brent crude has a relatively similar pattern but $80 has been more of a barrier over the last year. The failed upside break that peaked in May has delayed the medium-term uptrend for six months but prices are firming once more and beginning to pull away from the $80 level once more. A sustained move below the 200-day MA, currently near $77.50, would be required to question potential for a further test of overhead trading. .

The diminishing threat of a US economic double dip and the continued strength of high oil consumption growth economies in Asia and Latin America, coupled with a weak US Dollar are helping to attract investors back to the oil market.

Royal Dutch Shell has been going broadly sideways for much of the last five years and continues to rally from the lower side. This is the eighth consecutive week to the upside and it is approaching a previous area of resistance in the region of 2000p. While there is potential for a consolidation of recent gains before a long, a sustained move below the 200-day MA would be required to check medium-term upside potential.

Statoil, ENI and Total have all retested their 2009 lows over the last few months and remain on the lower side of their developing base formations. They have all firmed somewhat over the last 10 weeks and sustained breaks of their short-term progressions of higher reaction lows would be required to question the gradual return of demand dominance.

Repsol broke successfully above €19.50 last month and a sustained move below €18 would be required to question scope for further medium term upside.

BP found support near 300p from July following an accelerated decline. It continues to firm and has posted a succession of higher reaction lows over the last few months which would need to be broken to question scope for further higher to lateral ranging.

US major oil companies are outperforming their European counterparts. Exxon Mobil has been a laggard and retested its 2008 low in July. It has posted a succession of higher reaction lows since and these would need to be taken out to question scope for continued higher to lateral ranging.

Occidental Petroleum recouped most of its bear market decline by late last year and has been consolidating below the 2008 peak since. It is currently rallying from the lower side of the range and a sustained move back below $80 would be required to delay potential for a retest of the $90-$100 area.

Chevron Corp and Murphy Oil hit new recovery highs within the last week. Marathon Oil appears to be on the cusp of completing an 18-month 1st step above the base. ConocoPhilips is testing the upper side of a six-month range. Hess Corp is rallying towards the upper side of the 2-year base. This commonality supports the argument for higher trading and clear downward dynamics, sustained for more than day or two, would be required to question this view.