Photographer: Andrey Rudakov / Bloomberg
Photographer: Andrey Rudakov / Bloomberg
Investors and oil companies are quickly returning to the crude oil market.
Total holdings of Brent and WTI futures have risen to their highest level since May. Occurs when the banks of Goldman Sachs Group Inc. at JPMorgan Chase & Co. they see market prospects light up and some large hedge funds talk about commodities entering a price supercycle.
The rise in open interest marks a change after oil fell below zero, a defeat that drove a collapse in world crude oil production at the same time as falling consumption. Trade fell last year as U.S. crude oil production plummeted and consumers such as airlines withdrew from the coverage space. The nadir was in November. Since then, things have risen, with a strong rebound this year.
“People are reconsidering the investment case for the asset class of commodities,” said Harry Tchilinguirian, oil strategist at BNP Paribas. “Open interest in oil is rising again as macro-oriented funds analyze the commodity case.”
JPMorgan is one of the banks that claims to favor commodities as a hedge against inflationary pressures, while Bank of America Corp. he believes that inflationary pressures are already helping to raise oil prices.
Recovery
The concentration has also driven increased producer coverage, with WTI by 2022 about $ 50 a barrel. Brent for the same period is already above that marker. According to the executive director of the International Energy Agency, Fatih Birol, a large amount of shale oil production is profitable at current levels.
In parallel with the recovery in activity, there was also a rise in the number of bullish market participants. Last week there were 163 money managers with long positions at Brent and WTI, most since February. This has gone from lows of 94 in March.
The change is good news for CME Group Inc. and Intercontinental Exchange Inc., owners of the world’s largest oil exchanges.
“Our WTI markets continue to reflect broad worldwide participation as customers manage their overall price risk,” said Peter Keavey, CEO of Energy Products at CME Group. “WTI remains the market choice for managing crude exposure.”
Crude oil has had more reasons to be strengthened so far this year. A huge index The rebalancing was expected to enter the $ 9 billion market last week as prices rose to a ten-month high. In addition, the weakness of the dollar is driving the renewed conversation of commodity supercycle. Both JPMorgan and Goldman Sachs recommended increasing exposure to the sector in recent days.
Of course, there is “a lot of producer coverage and some of the things will be able to change,” said Paul Horsnell, head of commodity research at Standard Chartered Plc.
In addition, the short positions of barter distributors (a sign of the banks that managed the hedges they sold to producers) rose to their positions. highest level since April last week.
And with this year’s global economic recovery forecast, there will possibly be more oil inflows. The value of Brent and WTI’s open interest continues to fall by about a third from the $ 408 billion high of 2018, but the The World Bank forecasts 4% growth in the world economy this year and a 7.9% rise in China, the world’s largest oil importer.
“Brent is the global benchmark in crude oil pricing, so as global economic activity forecasts improve, we see strong demand for trading and risk management across the futures market. Brent, ”said Jeff Barbuto, ICE’s world leader in oil markets.