DBG - Crude oil buying capacity is insufficient? Oil price reversal?

DBG ForexIt is suggested that almost all crude oil shorts have been covered, and as buying slows, oil prices may reverse in the near future. The focus is starting to shift to the demand side, and a series of factors may prevent oil prices from continuing to rebound above $100.

Investors continue to buy oil futures and options, with a focus on crude oil, butSince almost all short positions have been covered, the market's bullish forces are starting to appear stretched, so buying has slowed down。

In the seven days ended Sept. 19, hedge funds and other fund managers bought the equivalent of 25 million barrels of oil on the six most important oil-related futures and options contracts. In total, fund managers bought 155 million barrels of oil in the three weeks since Aug. 29, according to ICE Futures Europe and the U.S. Commodity Futures Trading Commission's (CFTC) position records.

As in previous weeks, this week'sThe buying is almost entirely concentrated in crude oilInvestors bought a large amount of Brent crude oil (+ 18 million barrels) and New York Mercantile Exchange (NYMEX) and ICE exchange WTI crude oil (+ 17 million barrels). In the four weeks since August 22, funds have bought a total of 183 million barrels of crude oil-related futures and options.

Net position increased from 352 million barrels (20th percentile) four weeks ago to 535 million barrels (59th percentile each week since 2013). However, the ratio of bullish bulls to bearish bears rose from 3.39:1 (31st percentile) to 7.76:1 (89th percentile),Positions are becoming increasingly one-sided. Such one-sided positions are usually a sign that the market is getting nervous, indicating that the recent price trend may be reversing.

As crude oil prices have risen steadily since the end of June,Most of the previous bearish positions squaringFunds are holding only 20 million barrels short in NYMEX's WTI contract, which is basically the same as the previous week's 21 million barrels, but well below the 136 million barrel high at the end of June. The short-selling cycle that began in mid-April appears to have ended in mid-September, with short positions returning to an all-time low.

Additional production cuts announced by Russia and Saudi Arabia have reduced crude inventories, particularly near the Cushing, Oklahoma, delivery point. On September 15, Cushing inventories were 18 million barrels (-43%) below the ten-year seasonal average, and the shortfall widened significantly from the 1 million barrels (-2%) on June 30.

In the process, short sellers have been squeezed, helping to lift the price of WTI crude, which peaked at nearly $96 a barrel last week, from less than $70 a barrel at the end of June to more than $91 a barrel in recent months.

The demand outlook is cloudy, and the West is actively brewing to shoot down high oil prices

A growing number of analysts predict that due to increased demand, tight supply, and relatively low fuel and crude oil inventories,The price of Brent crude oil will exceed $100 a barrel this year. But at the same time, a number of factors could prevent the oil price from continuing to rebound above this level. These include an expected increase in non-Opec production, Russia's need to increase supply to increase revenue, and a possible slowdown in oil demand due to already high interest rates in major western economies.

Retail fuel prices in the US and Europe have risen to multi-month highs as crude oil prices have risen. "If energy prices go up and stay high, that's going to have an impact on spending and potentially affect consumer inflation expectations and things like that, that's just something we have to monitor," Federal Reserve Chairperson Jerome Powell said last week.

Analysts at Morgan Stanley share the same sentiment, arguing that althoughCentral bankers are likely to be wary of rising oil prices, but the rebound "has to last for some time to have a bigger and more lasting impact on core prices"If prices stay above $100 for a long time, it could increase governments' concerns about inflation

Non-OPEC + production growth could dampen any rebound.Goldman Sachs believes that non-OPEC + countries will increase supply by 1.10 million barrels per day by next year, while the International Energy Agency (IEA) forecasts an increase of 1.30 million barrels per day. Brazil, Guyana and the United States are the countries expected to increase production.

The recovery and growth in offshore production investment also made a long-term rebound in oil prices less likely, Goldman Sachs analysts said, adding that "most of the rebound has passed".

High interest rates are already dampening demand in Western economies, including for oil.Geopolitical considerations could also complicate decisions about how long OPEC + can maintain voluntary production cuts.BPbrokerPVM's Tamas Varga says Russia may not be able to curb exports for long, given the financial toll of the conflict.

Analysts say that for Saudi Arabia, the de facto leader of OPEC, a long-standing problem is likely to resurface in policy considerations.To achieve prices high enough to encourage producers without pushing the market to a level that undermines demand and sends the economy into recession。

Craig Erlam, analyst at OANDA, said: "If Opec + insists on cutting production, I'm not sure it makes economic sense to plunge the global economy into recession, which makes me wonder how high oil prices will go and how sustainable it will be."

After months of aggressively raising interest rates to combat stubborn inflation, policymakers in both the United States and Europe have signaled that rate hikes are at or near their peak. HSBC analyst Ajay Parmar told Reuters.Governments may consider fiscal measures, such as cutting fuel taxes, as a more direct way to limit the impact of high oil prices。

Gasoline prices, a sensitive issue in the run-up to the US Presidential Election, have breached the psychological $4-a-gallon barrier for the first time since October and retail diesel prices have hit their highest level since December, according to estimates by the US Energy Information Administration.

Biden has promised to cut prices, but has not yet said how, and in the short term, the impact of the fall refinery overhaul on supply could keep prices high.Limiting fuel exports and increasing refinery utilization are possible optionsThe U.S. government has tapped its crude oil reserves last year to increase market supply

The retail prices of diesel and gasoline in the euro zone and the United Kingdom also hit new highs in several months, prompting a new round of government action.France this week lifted a decades-old ban on retailers selling road fuel below cost to combat inflation。

Energy giant Total Energies has also agreed to extend the fuel cap of 1.99 euros per litre until the end of 2023Gordon Balmer, executive director of the Petrol Retailers Association, said the UK is expected to hold a general election next year, and politicians may hesitate to scrap the 5p-a-litre fuel tax cut that has been in place since March last year.