Tue, June 18, 2024

Oil prices are down: Economic concerns increase

global commodities

Oil prices fell as the short-covering surge spurred by OPEC+’s unexpected output goal drop ended. Oil prices fell as the short-covering surge spurred by OPEC+’s unexpected output goal drop ended. Therefore, global economic fears prompted a wave of profit-taking and new short sells.

Within the time period of the previous seven days until April 25, hedge funds and other financial professionals had disposed of approximately 87M barrels of goods. Among those were the six most important petroleum futures and options contracts. The sale was the first since the regional financial crisis in the United States erupted in March. It occurred after funds had acquired a total of 245M barrels in the preceding four weeks.

In the most recent week, we have witnessed an increase in sales across the board. Some of which included deals with Brent at the highest of 35M barrels. As well as NYMEX and ICE WTI at -19M. European gas oil came down to 14M barrels last week, followed by U.S. Gasoline at -13M and U.S Diesel at -6M barrels.

The aggregate position dropped to 447M barrels from 534M barrels a week ago. Therefore, it went from the 23rd percentile for all weeks since 2013 to the 38th percentile. The bullish long to bearish short position ratio declined to 3.52:1 (39th percentile) from 5.00:1 (64th percentile) the previous week.

Positions in the oil and gas sector

First, the OPEC+ output cut announced on April 2 affected the gas demand. Now, worries about a business cycle slowdown outweighed any remaining bullishness. Investment managers are particularly pessimistic about the future of medium distillates like diesel and gas oil. That is no surprise since these commodities are the most vulnerable to the industrial cycle.

On April 25, funds had a net position in middle distillates of only 7M barrels (21st percentile). Meanwhile, bullish longs outpaced bearish shorts by a ratio of 1.13:1 (21st percentile).

Persistent inflation, rising corporate layoffs, and increased caution in business and consumer spending all point to a further slowing of the business cycle in the coming months.

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