The growing oil market optimism in recent weeks has led to tangible evidence that traders are expecting an increasingly rigorous commodity market to progress this year.
Oil market participants are now expecting the cuts in OPEC and US sanctions against Venezuela and Iran.
Evidence is that Brent Crude's calendar for the second half of this year has turned into a delay of about $ 0.90 a barrel, compared to a contango of $ 0.70. at the end of last year, Reuters analyst John Kemp noted.
Reverse movement is the market situation where the prices of the first month are traded with a premium compared to further prices in the future – a sign of a tighter or insufficient market, In the opposite structure ̵
t The credit spread of Brent Crude was also helped by the return of bullish hedge funds in Brent's near-monthly futures contracts, Kemp said. Portfolio managers usually focus their bets on contracts closer in time due to higher liquidity. Thus, the return of the bull speculators also contributed to the transition to late contracts later in time, later in 2019. Related: 2 reasons why the big oil is not in a hurry. Over the past two weeks, the mood of the oil market has been rising. First, Saudi Arabia signaled that in March it would cut by 500,000 basis points. more than its share of the cuts in the deal with OPEC and will further reduce exports to below 7 million Barrels per day. Then signs began to appear that the US and China could reach a trade deal, potentially preventing global economy concerns that could worsen oil demand. Next are the US sanctions against Iran and Venezuela that restrict supply while there is uncertainty about how many additional raw barrels will be muted by these two OPEC countries while Nichola Maduro tries to stick to power and because there is no certainty about how the US will approach the releases of Iranian oil customers after their expiration in early May 2019.
So the hedge fund and other cash managers increased their long positions in Brent by 10% during the week to February 12, with the latest personal data This was the biggest rise in bullish bets since the end of August 2018, according to Bloomberg. Bets that Brent crude oil prices will drop by 5.5% in the last week. This was the first clear signal this year that portfolio managers are turning to oil prices. Brent's net long position – the difference between bets that raise prices and bets to decline – has also risen over the past few weeks, but mostly due to the closing of many shorts by the end of 2018 rather than updated.
During the week to February 5, portfolio managers added longer positions on the stock exchange, but short positions also rose for the first time this year. Although the speculative positioning during the week led to a slight increase in the combined net long position, the rise in short positions suggests hedge funds are much less undefined when oil prices are going to be next. In the week to February 12, however, the general mood of the hedge fund market changed from undefined to bullish, speculative buying in short-term contracts for Brent accelerated Worsening oil – the perception that the oil market will be tougher in the second half of the year.
Saudi energy minister Khalid al-Falih said this week that he hopes the market will return to balance by April, confirming the determination of the OPEC leader. Making everything possible to rebalance supply and demand is "indisputable."
The reduction of Saudi Arabia and OPEC, the sanctions against Venezuela and Iran, and hopes that an American-Chinese trade war will be prevented from overcoming the bullish mood of the oil market. However, rising US oil production and the return of fears of slowing world economic growth and oil demand can re-establish market sentiment.
By Цветана Параскова for Oilprice.com