As international economists and oil analysts are turning more positive on the short to mid-term outlook for oil, the sentiment in oil markets continues to be decidedly bearish
on the oil price outlook compared to previous sentiment. Four energy agencies including the IEA and OPEC Secretariat have made their predictions for oil demand growth in 2023, with the only common theme being that all four expect demand to grow compared to 2022, but all are less optimistic than they were a year or so ago.
According to commodity analysts at Standard Chartered, the SVB collapse led to the fastest-ever move to the short side in oil markets, with speculative short volumes more than six times larger than those after the collapse of Lehman Brothers and Bear Stearns in 2008. Money-manager positions across the four main Brent and WTI futures contracts became shorter by a record 228.9 million barrels in the space of just two weeks.
At this point, it’s not clear whether these sharp swings in the same direction are due to an over-reliance on similar algorithms by traders. And, just like us, StanChart says the excessive bearishness is overdone relative to underlying news flow and fundamental data.Normally, U.S. inventories and oil prices have a strong inverse relationship, with falling inventories pushing prices higher while rising inventories have the opposite effect.
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