Investors don’t believe in oil amid recession risk
2022.12.12 08:43
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Investors don’t believe in oil amid recession risk
Budrigannews.com – For the fourth week in a row, portfolio investors were heavy sellers of petroleum, as the smooth implementation of the Russia price cap brought the economy’s weakness and oil demand into sharper focus.
Over the seven days that ended on December 6, managers of money, including hedge funds, sold the equivalent of 30 million barrels in the six most important futures and options contracts related to petroleum.
According to position records that have been made public by ICE (NYSE:), fund sales have totaled 221 million barrels over the four most recent weeks. The Commodity Futures Trading Commission of the United States and Futures Europe.
The combined position has decreased from 579 million barrels (47th percentile) on Nov. 8 to just 358 million barrels (the 12th percentile for all weeks since 2013).
Crude positions have already been severely affected, limiting opportunities for further sales. However, liquidation has spread to refined products, particularly middle distillates, which are essential transportation and industrial fuels.
Fund managers sold US gasoline (-5 million barrels), US diesel (-11 million barrels), European gas oil (-5 million barrels), NYMEX and ICE WTI (-4 million barrels), and more.
As a result, Brent’s net position dropped to 95 million barrels (5th percentile), the lowest level since the coronavirus epidemic’s first and second waves occurred in 2020.
However, this weakness is now spreading to middle distillates, which were previously the market’s strongest segment due to low inventories.
On November 8, the net position in American diesel and European gas oil decreased from 75 million barrels (62nd percentile) to 49 million barrels (41st percentile).
The ratio of bearish short positions to bullish long positions was 2.92:1 (52nd percentile), down from 5.40:1 (81st percentile) four weeks earlier.
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Although U.S. inventories of distillate fuel oil remain below the seasonal average from before the pandemic, the deficit has significantly decreased over the past eight weeks, alleviating much of the market’s pressure.
Easing back assembling development, increasing loan fees, struggle among Russia and Ukraine, sanctions and persevering expansion have made a noxious mixed drink for oil utilization and distillates.
If managers attempt to reestablish bullish positions, upside price risk has been created by the extremely low level of crude hedge fund positions.
However, many managers are likely to remain cautious about re-entering the market until some of the negative factors that are affecting consumption are fixed.
