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OIL: Oil at Risk of Price Spikes from Investor Positioning: Currie

OIL

Oil prices are at risk of spiking following a “carry trade” that has diverted capital from the market, according to Jeff Currie at Carlyle Group cited by Bloomberg.

  • High interest rates have driven hedge funds and physical oil players to cut up to $100 billion in futures positions and crude inventories in favour of US money markets.
  • Oil should look more appealing both physically and financially as lower US Fed rates help draw money back.
  • The disparity between tight fundamentals and subdued prices is ultimately explained by the carry trade, said Currie. 
  • Investors bets for a price decline leave markets vulnerable to spikes and a serious oil supply disruption could sharply amplify the move, Currie said.
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