Geopolitical dangers, such as the continued Middle East crisis and Ukrainian drone attacks on Russian oil facilities, should temper extreme bearish rhetoric.
With the OPEC+ alliance’s recent agreement to increase output adding to already pessimistic predictions that the globe is on the verge of an oil glut this year, hedge funds cut their bullish position on US crude to its lowest level ever.
According to the Commodity Futures Trading Commission, money managers reduced their net-long position on West Texas Intermediate by 14,630 lots to 12,657 lots in the week ending September 29, the lowest level since June 2006. In the meanwhile, according to statistics from ICE Futures Europe, net-long bets on Brent oil fell by the most amount since June.
For eight of the last ten weeks, money managers have become less optimistic about crude as the market swung toward a global oil glut that is probably going to materialize in the fourth quarter. much as summer consumption declines, the prognosis has become much worse after the Organization of Petroleum Exporting Countries and its partners decided last weekend to increase production by 137,000 barrels per day in October.
Two of the most well-known energy analysts in the world have added to that pessimism. The International Energy Agency this week predicted a record oil supply surplus next year, while the US Energy Information Administration predicted that stockpiles would already begin to accumulate in the current quarter.
According to statistics released by the US government last week, the nation’s gasoline and oil inventories increased by the most since July 2023, suggesting a weakening domestic market. In the meanwhile, there are worries that the global trade war will have a negative impact on economic development, and poor areas of employment statistics are upsetting longer-term consumer expectations.
However, geopolitical factors such as the continuing Middle East crisis and Ukrainian drone attacks on Russian oil facilities might temper the severe negative Discourse.