The Oil could still resume the medium term upside movement, even if we'll have a minor decrease, right now I don't believe that the price will reverse. While the Fed deciding the economy is strong enough to support a March interest rate rise in the US would be likely to put downward pressure on gold prices, some analysts are now predicting upwards movement towards $1300 is also a genuine possibility.

The current price differentials have made flows of USA crude oil to Asia commercially profitable after the Saudi-led production cuts resulted in higher Dubai and Oman benchmark prices against the US benchmark WTI and the Brent benchmark.

High oil inventories have been undermining efforts by the Organization of the Petroleum Exporting Countries and other producers including Russian Federation to tighten the market by cutting production.

OPEC Output Cut vs.

The Organization of the Petroleum Exporting Countries and 11 other heavyweight producers, such as Russian Federation, late past year pledged to trim down production by 1.8 million barrels a day to support prices. Last Tuesday, the American government released a report showing that the USA oil output increased for a second month in a row in November.

Crude oil from the North Sea was flowing to Asia at record rates in January and was set to reach 12 million barrels.

Data from regulators and exchanges showed speculators have built long positions equivalent to nearly 1bn barrels of crude across the major contracts, while short positions amount to just 111m barrels.

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Meanwhile, Saudi Arabia, the biggest oil producer, has already cut more barrels per day to its production.

U.S. bank Goldman Sachs said that high fuel inventories and rising USA crude production meant that oil markets would be over-supplied for some time, but that they would drain gradually.

USA crude oil refinery inputs averaged 15.9 million bpd last week, a 54,000 bpd decline from the previous week's average. But U.S. and North Sea cargoes may not be flocking as much to Asia in the coming months because arbitrage windows can open and close with market volatility, the manager noted. In recent weeks, United States crude inventories rose 2.5 million barrels, while gasoline stockpiles jumped 1.2 million barrels.

Rounding out action in the energy markets, prices for natural gas finished higher after the EIA Thursday reported that supplies of the fuel fell by 152 billion cubic feet ( for the week ended February 3.

Recently, US President Donald Trump commented on Iran's violation of the nuclear accords by undergoing ballistic missile test launch in Tehran, imposing new sanctions against the country.

The rise in oil prices was somewhat surprising, as the big build in stocks undermines expectations for tighter supply.

"The move by the impose new restrictions on Iran does raise the risk of further tensions disrupting (oil) supply", ANZ bank said. The country is not included in the OPEC output deal.