Crude Oil: Despite selling pressure in Asian session Friday, crude oil price found support at 77.76 and rallied strongly to as high as 80.1. The black gold ended the day and the week at 79.81, gaining +0.9% on daily and +7.7% on weekly basis.

The dramatic daily reversal was driven by strength in equity markets, supply worries due to a strike in France and escalated tension in Iran.

US headline CPI rose +0.2% m/m (consensus: +0.3%; Dec: +0.1%) in January while core CPI actually contracted -0.1% m/m, for the first time since December 1982, during the month. On annual basis, the headline CPI rose +2.6% (consensus: +2.8%; Dec: +2.7%) while the core added +1.6%. Weaker-than-expected inflation readings indeed eased investors' worries about the Fed's tightening. The market was also relieved after several Fed members, including Chairman Ben Bernanke, New York Fed President William Dudley and St Louis Fed Kames Bullard, reiterated the policy rate will stay low for an extended period.

In a protest against the possible shutdown of a refinery plant, workers at Total's 6 French oil refineries extended a strike Thursday, making some petrol stations running out of fuel in the next few days. Total supplies 53% of oil and gas in France.

Geopolitical tensions between Iran and the western world over nuclear weapons escalated. According to a report from the International Atomic Energy Agency (IAEA), there are concerns about the 'possible existence in Iran of past or current undisclosed activities related to the development of nuclear payload for a missile'. It's highly likely for the UN to import more sanctions on the Iran which rejects accusations that the nation is developing nuclear weapons. Iranian Supreme Leader Ayatollah Ali Khamenei said the US Secretary of State Hillary Clinton is spreading 'lies' by saying Iran is turning into a 'military dictatorship' during her visit to the Persian Gulf. Oil prices historically demonstrated high direct correlation to geopolitical unrests.

Last week's rise in oil price was driven by market sentiment rather than oil-specific fundamentals. In fact, the demand/supply outlook in the energy market remained sluggish. According to the US Energy Department, crude oil inventory surged +3.09 mmb to 334.5 mmb in the week ended February 12, driven by +2.5% surge in imports. Refinery runs surprisingly improved with utilization rising +0.6% to 79.8%. Gasoline stockpile built by 1.62 mmb to 232.1 mmb. Demand plunged -2.8% to 8.521M bpd, reversin the +1.8% gains made in the previous week. On annual basis, current demand level remains -4.3% below last year. Distillate was the only sweet spot with a draw of -2.94 mmb. Imports fell while demand soared +2.5% to 3.787M bpd as extremely cold weather boosted consumption. However, demand remains dismal as it is -13% less the same period last year and -20% below 5-year average.

In coming weeks, central banks' attitudes towards unwinding previous stimulus measures and sovereign debt issues in the Eurozone will continue to be the key factors determining oil prices. In the medium- to long- term, however, whether price can break above recent trading range of 70-80 hinges on the pace of economic recovery.