Oil prices on the up again

Oil prices touched levels not seen since early June as concerns over the health of the US economy (and subsequent oil demand from the world's largest consumer) continued to weigh heavily on the market.

EIA data reported increases in stock levels in distillates and gasoline with crude stocks registering a drop.

The receding threat from Hurricane Dolly also helped bearish sentiment. A release by Lehman Brothers cutting demand forecasts for 2008 served to articulate the belief in the market that high oil prices are beginning to impact demand.

The question remains whether we are seeing a key reversal in the crude oil trend - the critically important $123 level holds the key with a break of this support a pre-cursor to a return to $110-108.

At this stage it is difficult to justify any real confidence that the target will be met - geopolitical concerns will continue to support the market with threats of further terrorist action in Nigeria and the Iranian nuclear dispute refusing to go away.

The measure of support afforded by the Gulf hurricane season cannot be ignored either. The recovery of the Dollar has dented oil prices but on the exchanges business is currently focussing around traders unwinding longs rather than aggressively establishing short positions.

Brent crude range today expected to operate within a $123.70-$126.70 band.