Commodities
Oil market news: Investors are fleeing the oil market
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.
By Enes Tunagur
(Reuters) -Oil prices fell on Friday as analysts continued to forecast a supply surplus in 2025 despite the OPEC+ decision to postpone planned supply increases and extend deep output cuts to the end of 2026.
futures were down 66 cents, or 0.9%, to $71.43 per barrel at 1128 GMT. U.S. West Texas Intermediate crude futures were down 65 cents, or 1%, to $67.65 per barrel.
For the week, Brent was on track to fall 2%, while WTI was on course for a 0.5% drop.
The Organization of the Petroleum Exporting Countries and its allies on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.
The group, known as OPEC+ and responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially in China – and rising output elsewhere have forced it to postpone the plan several times.
“The outcome of the latest meeting of OPEC+ members surprised us positively … The extension of the production cuts shows the group remains united and is still targeting to keep the oil market in balance,” UBS analyst Giovanni Staunovo said.
Pressuring prices on Friday, analysts reiterated expectations of a supply surplus next year, although some of them now view a smaller surplus than before.
Bank of America forecasts increasing oil surpluses to drive Brent to average $65 a barrel in 2025, while expecting oil demand growth to rebound to 1 million barrels per day (bpd) next year, the bank said in a note on Friday.
HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.
Brent has largely stayed in a tight range of $70-75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.
“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.
By Paul Carsten
LONDON (Reuters) -Oil prices pared some gains on Thursday after a source told Reuters OPEC+ has agreed to delay a planned oil output hike until April 2025.
was up 24 cents, or 0.3%, to $72.55 a barrel at 1237 GMT. It had been at $72.84 before Reuters reported the delay.
U.S. West Texas Intermediate (WTI) rose 25 cents, 0.4%, and was trading at $68.79 a barrel.
The planned delay comes as OPEC+, made up the Organization of the Petroleum Exporting Countries plus allies including Russia, tries to support prices as it wrestles with weak demand, notably from China, and rising supply outside the producer group.
“It will not make next year’s oil balance tight and supply surplus is still anticipated,” said Tamas Varga of oil broker PVM. “This view was mirrored in the gut price reaction.”
There remains the question of how long the delays could last, with this only the latest in a series. OPEC+ was originally due to begin raising output in October as part of a plan to gradually unwind the group’s most recent layer of output curbs of 2.2 million barrels per day.
“They reiterate that these barrels will indeed come back,” said Bjarne Schieldrop, chief commodities analyst at SEB. “It’s a limited time frame. This means there is no upside to the oil price in the next couple of years.”
Elsewhere, a larger-than-expected draw in stockpiles last week also provided some support to prices.
In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and its attacks would go deeper into Lebanon and target the state itself.
Meanwhile, Donald Trump’s Middle East envoy has travelled to Qatar and Israel to kick-start the U.S. President-elect’s diplomatic push to help reach a Gaza ceasefire and hostage release deal before he takes office on Jan. 20, a source briefed on the talks told Reuters.
On Thursday, OPEC+ is expected to postpone its planned increase in oil production, which was initially scheduled to commence in January, Reuters reported.
The decision to maintain current output levels aims to provide additional support for the oil market. The group, responsible for about half of the world’s oil supply, had intended to start easing output restrictions through 2025 but is now reconsidering in light of a global demand slowdown and increased production from non-member countries.
The consortium’s plan to unwind output cuts has faced challenges due to these market conditions, which have also exerted downward pressure on oil prices.
Accordingly, an extension of the current output cuts for an additional three months is the most probable outcome of the online meeting. However, there are indications that an even longer extension could be under consideration.
The deliberations within OPEC+ reflect the group’s ongoing efforts to balance oil supply with fluctuating global demand. The decision to delay the increase in output is seen as a measure to stabilize the market, which has been affected by various economic factors.
Market participants are closely monitoring the developments from OPEC+’s meeting, as the group’s decisions have significant implications for global oil supply and pricing. The final outcome of the meeting, including the length of the extension, will be determined by the consensus of the member countries.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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