A massive release of strategic reserves in the US and worrisome news regarding the economies of China and Europe influenced the decision of portfolio investors to sell oil last week, despite the impending future disruption of oil imports from Russia.
In early April, hedge funds and other money managers sold six large oil-related futures and options contracts worth the equivalent of 11 million barrels.
According to stock reports, the funds sold, reducing their total net long position by an amount equal to 188 million barrels.
Last week, sales of Brent crude (-4m barrels), NYMEX and ICE (NYSE: ICE ), WTI (-3m), US gasoline (-2m) and European gasoil (-4m) were negligible when buying in US diesel fuel (+1 million).
Brent crude futures rose $3.26, or 3.31%, to $101.74 a barrel at 1002 GMT, while US West Texas Intermediate futures rose $3.01 , or 3.19%, to $97.30. Both contracts lost about 4% on Monday.
Bullish long positions fell by 8 million barrels, while bearish short positions increased by 4 million barrels.
Longs outnumber shorts by a ratio of 4.64:1, the 59th percentile in all weeks since the start of 2013, allowing funds to remain positive.
Overall, however, positioning has become more prudent, with aggregate net long positions of 542 million barrels (36th percentile) compared to January’s data of 761 million (80th percentile).
The total number of option futures positions held by hedge funds and other traders fell by 18% (1,142 million barrels) for seven consecutive weeks.
Sharply rising margin requirements, uncertainty on the part of macroeconomic conditions, increased volatility give great risks and appreciation, both for opening new positions and for holding existing ones.
Both demand and supply are currently uncertain as on the one hand, there are all signs of a slowdown in the economy in Europe and North America, and outbreaks of coronavirus in China also contribute here. On the other hand, the expected supply disruption of Russian oil to date is offset by the fact that the US and its allies have promised to use strategic reserves of 240 million barrels.
At the same time, OPEC warned that potential supply losses from Russia could not be offset. We are talking about 7 million barrels per day of exports of Russian oil and other liquids lost in the event of sanctions or voluntary actions.
“The oil market remains vulnerable to a major shock if sanctions are imposed on Russian energy and that risk remains,” writes Edward Moya, senior market analyst at OANDA.
IEA member countries plan to release 240 million barrels over the next six months, starting in May, to take pressure off the market. However, analysts believe that these actions will not affect the investment deficit, which means that it will be necessary to replenish stocks.
As a result of the ongoing events, crude oil is losing ground a little, while the situation with diesel fuel and other middle distillates is still optimistic.
For most financial experts, the balance of oil production and consumption is becoming less tight going forward as the macro economy struggles, but at the same time, demand for diesel and jet fuel remains.
Latest News