Yesterday's strong move in oil was attributed to weather in many media outlets but that didn't make sense due to the structure of the move (i.e. impact on time spreads) and the coincident moves in other commodities like Gold and Silver. Well, it turns out that there was heavy index buying of commodities yesterday (according to the NY desks of several major banks). Since these indexes (especially the GSCI) are heavily weighted towards crude oil, this was especially bullish for oil, although we also saw the impact in precious metals, agricultural commodities and natural gas.
This could be a bullish short term factor for oil prices since beginning of the year index buying often persists for multiple days. It is likely that this has been in the background supporting crude prices for the last few days and that it may persist for another week or so. That being said, I would be careful here. Oil is quite extended (up $15 from the bottom) and the big banks wouldn't be so open about the index buying unless it were at least halfway done (if it just started they would be quietly frontrunning it) Our suspicion is that beginning of the year buying and cold weather are the main factors behind the recent run up in oil prices and that we are probably close to a near term top at this point.
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