LONDON/NEW YORK (Reuters) – Sentiment in the oil market has shifted dramatically in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand.
The oil market has struggled to sustain a rally despite supply restrictions that generally would be considered bullish. U.S. sanctions on Venezuela and Iran have removed more than 1.5 million barrels of daily supply from the market, OPEC extended a supply-cut deal into 2020 and tensions between the United States and Iran are rising.
Brent - Futures - Move - Barrel - Percent
Yet, Brent futures have struggled to sustain a move above $65 a barrel and slumped about 7 percent last week, while U.S. futures have rarely moved above $60 a barrel.
“Given all the bullish news we’ve had, the flat price has hardly changed,” said Janelle Matharoo of InsideOut Advisors, a commodities trading and risk management consultancy. “Fifteen years ago, this kind of news would have shifted the price $20, $30 per barrel.”
Hedge - Funds - Investors - Bets - Realization
Hedge funds and investors have exited bullish bets on the realization that demand may be weaker than anticipated while U.S. production surges. Producers, meanwhile, have rushed to lock in future prices, betting that this may be their best chance to protect against a selloff, oil traders and brokers said.
Front-month, or current, futures contracts have not had a massive selloff – but looking at later-dated contracts, the underlying weakness is apparent.
Premium - Brent - Crude - Futures - Oil
The premium on front-month Brent crude futures compared with oil to be delivered in half a year has fallen from a six-year high in May at more than $4 a barrel to less than $1.50 last week. That is a signal that worries about tight supply have abated.
Even rising tensions in the Strait of...
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