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Danish risk management specialist A/S Global Risk Management Ltd. has released its quarterly oil market report this week, where the company warns that the recent increase in the price of gold is an early indicator that higher inflation is around the corner.

Commenting on this year's 60 percent increase in the price of gold, Global Risk Management said "[The] current record high gold price increase is giving an early warning of higher inflation. Some investors see commodities and especially gold as a safe haven when inflation expectations go higher. Oil prices will follow inflation up when fundamentals improve."

In its December report Global Risk Management points out that distillate inventories have continued to rise during the last few months and that global stocks are currently 35 percent higher compared to the same period last year. "Inventories must be reduced to balance the market," said Thorbjorn Bak Jensen, Oil Market Analyst at Global Risk Management.

“The refining sector and distillate inventories are out of balance with normal market conditions”, added Jensen.

“Inventories must be reduced to balance the market. When balance is found again and OPEC slowly produces more oil as demand increases and inflation returns, oil prices will start increasing”, Thorbjorn continued.

Global Risk Management has revised its oil price forecast up and sees moderate oil prices in mid 2010 as fundamentals begin to firm with growth expectations.

As OPEC spare capacity lowers on lack of investments and recovery takes hold, Global Risk Management predicts oil prices will go through the $100 barrier.

The full report can be found by clicking on the following link below:

Global Risk Management Quarterly Oil Report