Oil market news: Hedge funds are leaving the market because of strong fluctuations in the price of “black gold. According to Reuters, activity in the oil markets has dropped to its lowest level in seven years. Hedge funds are leaving the global oil market by the dozens because of strong daily fluctuations in the price of “black gold”.

Now the normality measure for oil markets is exceeded. Thus, from February 24 to August 15, 2022, the average daily price range for a barrel of Brent oil was $5.64, while last year it was almost three times lower – $1.99.

The departure of traders is far from the only downside of high volatility. The fact that companies in the food industry, for example, are wary of hedging against price fluctuations affects other sectors of the economy as well. This includes the oil industry itself.

It’s not just the current volatility that’s affecting production growth in the oil industry. It is also negatively affected by uncertainty about future demand. This impact is especially noticeable against the backdrop of the growing transition to green energy.

Situation on the global oil market

Most countries are determined to switch from fossil to renewable energy sources despite the very high cost of this switch, which inevitably leads to a decrease in demand for oil.

After February 24, interest in oil futures decreased by 20%. This is likely due to traders’ fatigue from price swings, which are being rocked by supply constraints on the one hand, and by fears of inflation on the other. 

Businesses will continue to badly need energy, which will continue to be scarce. But high electricity prices will continue to threaten the growth rate of businesses and companies. The authorities, on the other hand, will continue to pump money into the energy transition and develop and improve legislation. All of this will do even less to encourage oil companies to ramp up production.

Earlier, we reported that metal prices are rising on supply doubts.