Investors Bet Against OPEC+ Raising Oil Prices
LONDON – Investors are growing doubtful that OPEC+ will be able to raise crude oil prices sufficiently to counteract the increase in non-OPEC output and the declining economic forecast. This pessimism is reflected in the recent selling of petroleum futures and options contracts by hedge funds and other money managers. However, despite the bearish sentiment surrounding crude oil, many professionals are optimistic about refined fuel prices, particularly U.S. gasoline and diesel, due to low inventories providing support for prices.
Over the last week ending on November 21, investors sold the equivalent of just 3 million barrels in the six major petroleum futures and options contracts. While crude sales, including Brent and NYMEX/ICE WTI, totaled a substantial 25 million barrels, purchases of fuels, such as U.S. gasoline and European gas oil, amounted to 21 million barrels.
The combined position in crude now stands at just 225 million barrels, nearing the record low of 205 million barrels seen in the data going back to 2013. The position in NYMEX/ICE WTI is particularly low at only 70 million barrels, the second percentile since 2013, as U.S. oil production continues to rise.
On the other hand, fuel positions provide a more positive outlook, with a total of 114 million barrels held by funds. Notably, there are substantial positions in U.S. gasoline and U.S. diesel, with 64 million barrels and 33 million barrels respectively. Funds have been buying gasoline for the past five weeks, adding 38 million barrels since mid-October.
In the natural gas market, investors have sold the equivalent of 236 billion cubic feet (bcf) in futures and options at Henry Hub in Louisiana. This has led to a net short position of 15 bcf, representing the 31st percentile since 2010, as efforts to build a bullish long position in gas continue to be hindered by warmer temperatures and robust production growth.
Despite low prices, working gas inventories in underground storage have been in a surplus. As of November 17, inventories were 128 bcf above the ten-year seasonal average, indicating that prices will likely need to remain low for the next few months to restore balance to the market.
Overall, investors’ confidence in OPEC+’s ability to boost oil prices has waned, with a bearish sentiment prevailing. However, there is optimism surrounding refined fuel prices, especially U.S. gasoline and diesel, as low inventories offer support. The natural gas market, on the other hand, continues to face challenges due to increased production and warmer weather affecting demand. As the global economic outlook remains uncertain, investors will closely monitor market dynamics to make informed decisions.
Note: This news article is for informational purposes only and should not be considered as financial advice.
