In the last four months, investor optimism that global crude prices will increase has slumped by nearly half.
Hedge funds’ net-bullish position on Brent crude, an evaluation of how positive money managers are that prices will gain, has jumped 49% from early April as trade wars cloud the picture for oil consumption. In spite a good week for the benchmark among strikes at North Sea fields and refuses in US stockpiles, Brent stays regarding 6% down from this year’s peak in May.
Mark Watkins, who assists oversee $151 billion at US Bank Wealth Management mentioned, “When you start to look at the different economies across the globe — Europe, Asia, the emerging markets are definitely starting to hit some headwinds.”
Investors “are potentially getting a little bit more concerned about the rest of 2018, and probably going into 2019, that demand might be a little bit softer than previously had been,” he stated.
The exchange of tariffs between China and the US is one of the component that frightens to weaken global economic expansion and hurt energy demand. Technical indicators even pointed to a strong decline in prices. During the period covered by the report, Brent’s 50-day moving average reduced below its 100-day one, an invitation to sell.
Hedge funds’ net-long position – the difference between bets on higher prices and wagers on a drop – in Brent was decreased to 324,431 contracts, ICE Futures Europe data displays for the week ended August 21. Which compares with a high for the year of 632,454 in the week ended April 10. Longs declined to the lowest in more than two years.
Saudi Arabia has formally kept the initial public offering of its state oil company on hold while the producer, Aramco, aims on purchasing a strategic stake in local petrochemical group Sabic for almost $70bn. While the Sabic contract will delay the IPO, it does not mean it is cancelled, people familiar with the matter informed, asking not to be identified because the information is private.
Brian Kessens, who assists in managing $16bn in energy assets at Tortoise stated, “It seems like worst case for Saudi Arabia: It’s off the table. Best case: It’s delayed even further.” He even said, “Some people thought that if the Aramco IPO was going to go forward, that at least that would offer longer-term support for oil.”
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