On Friday, oil prices rose above $82 a barrel. Benchmark crude for September delivery was up 38 cents to $82.39 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract had settled at $82.01 on Thursday. Brent crude was up too by 29 cents to $81.90 a barrel on the ICE futures exchange.

The rally was driven by the weakening US dollar and some dip in US inventories over the last few weeks, analysts felt. The attack on Japanese container may also have contributed in raising the “Fear Premium.” Concerns that Europe and Asia will experience a faster recovery than the US have in the meantime caused the value of the US dollar to fall against the euro. Risk of deflation has also contributed to the lower dollar. Tropical Storm Bonnie along the Gulf of Mexico also put a slight damper on production last week. All this contributed to the somewhat strengthening of prices.

Yet sentiments are gradually turning sluggish. Markets appear vulnerable to downdrafts. Most analysts are currently projecting a bearish outlook. In a Bloomberg survey carried out earlier in the week, 28 of 46 analysts, or 61 percent, forecast oil prices will decline through Aug. 13. Interestingly, this is the most bearish picture coming out of a Bloomberg survey since July 2009.

And there are reasons for the emerging despondency. US gasoline supplies increased 729,000 barrels, or 0.3 percent, to 223 million last week, the highest level since April 30, the recent US Energy Department report confirmed. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 2.17 million barrels to 169.7 million, the highest level since the week ended on Oct. 16. Crude oil inventories in the 15-state Midwest rose to 97.7 million barrels in the week that ended on July 30, the highest level recorded since the data began to be recorded in 1990. Inventories for crude oil and petroleum products are currently above normal levels, a problem that has persisted for over a year. Consumption of refined products has been showing only a modest recovery after falling sharply during the recession.

On the other hand, the overall US fuel consumption is going down. It dropped 2.5 percent to 19.3 million barrels a day last week.

Oil is unlikely to rise much above $80 a barrel over the next 18 months because recent rallies have been driven by broad financial market sentiment, not by oil fundamentals, Angelos Damaskos of the London-based oil fund Junior Oil Trust was quoted as saying earlier in the week. He underlined that oil’s rally in recent days was driven by optimism over global economic recovery, which could easily be reversed. “2010 and 2011 are going to be years of subdued economic growth, and demand from the developed economies will continue to be weak. Our view therefore is that oil will trade in a range between $65-$85 for the next year and a half,” said the fund manager.

And indeed the outlook for the global economy is not rosy, to say the least. Some say it is darkening. Recovery at the world’s largest economy, the US, is hanging in the balance. Recently released data indicates that in July 131,000 jobs were lost in the US. The private sector, which propels the US economy, could add only 71,000 jobs in July, down from 83,000 in June and below the consensus forecast of 90,000. The unemployment rate is standing at 9.5 percent. Figures released last week also confirmed that the US economy in fact slowed down in the spring, and the Department of Labor’s monthly statistical snapshot of hiring pointed toward a stall in hiring this summer.

Prior to the crisis in 2007, President George W. Bush spent 19.6 percent of GDP and the deficit was $161 billion. On the other hand, two years into the economic recovery in 2011, Obama’s budget projects outlays at 25.1 percent of GDP and a $1.3 trillion deficit.

Thirteen months into recovery from a deep recession, this is disappointing. The US economy needs to absolutely add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6 percent. Net of inventory adjustments, the economy demand for goods and services is also growing at a meager 1.3 percent a year. Unless the rapid growth in imports can be curbed, the US economy is headed for very slow growth and rising unemployment, analysts now maintain. This is also bad news from the perspective of oil consumption. After all, the US is the world’s largest crude user, consuming roughly 25 percent of the total global output and any changes in its consumption pattern steeply affect the global oil markets.

With some economists predicting a “double dip” recession, there is renewed pressure on US government and lawmakers to consider the next steps to bolster the faltering economy.

All is definitely not well on the horizon. There are gaping holes in the overall picture. Crude prices are on upswing at present yet facts belie the movement. Fundamentals are weak and appear to weaken further.

And this cannot escape impacting future crude price movement. Although forecasting future market prices could be professionally hazardous, as has been proven time and again, yet one is tempted to point out at this stage that fundamentals point to a bearish crude market outlook, at least in the near to mid term.