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Stabilising Oil Prices Detracting Speculators: Reuters

OIL

Oil markets have calmed following major disruptions from the pandemic, Russia’s invasion of Ukraine, and the subsequent sanctions regime, with production and consumption growing at similar rates, Reuters’ analyst John Kemp said.

  • There are signs that the market has found an equilibrium following several tumultuous years, Kemp said.
  • The comfortable production-consumption balance has led hedge funds and other speculators to scale back oil positions and redeploy capital to other markets, such as power, gas, and metals.
  • Hedge fuds held a combined position across the six most important petroleum futures and options contracts equating to 380m bbl on May 21, compared to 685m bbl six weeks prior.
  • Brent has averaged $83/b in May to date, in line with the inflation adjusted average since 2000. This is not sending a strong signal to either producers or consumers to modify behaviour.
  • Furthermore, annualised volatility has fallen to just 13%, in the 4th percentile for all overlapping periods since 1990, Kemp said.
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Oil markets have calmed following major disruptions from the pandemic, Russia’s invasion of Ukraine, and the subsequent sanctions regime, with production and consumption growing at similar rates, Reuters’ analyst John Kemp said.

  • There are signs that the market has found an equilibrium following several tumultuous years, Kemp said.
  • The comfortable production-consumption balance has led hedge funds and other speculators to scale back oil positions and redeploy capital to other markets, such as power, gas, and metals.
  • Hedge fuds held a combined position across the six most important petroleum futures and options contracts equating to 380m bbl on May 21, compared to 685m bbl six weeks prior.
  • Brent has averaged $83/b in May to date, in line with the inflation adjusted average since 2000. This is not sending a strong signal to either producers or consumers to modify behaviour.
  • Furthermore, annualised volatility has fallen to just 13%, in the 4th percentile for all overlapping periods since 1990, Kemp said.