Photographer: Andrey Rudakov / Bloomberg
Photographer: Andrey Rudakov / Bloomberg
Investors and oil companies are rushing into the oil market.
Brent and WTI’s total holdings of futures rose to their highest level in May. It happens when the banks of Goldman Sachs Group Inc. to JPMorgan Chase & Co. I see the growing market outlook and some large hedge funds are talking about commodities entering a pricing super-cycle.
The increase in open interest marks a change from the consequences of the collapse of oil below zero, a fall that stimulated a collapse in global crude oil production at the same time as the sinking of consumption. Transactions fell last year, while US crude oil production fell and consumers, such as airlines, withdrew from the coverage area. Nadir was November. Since then, things have grown, with a sudden comeback this year.
“People are reconsidering the investment case for the commodity asset class,” said Harry Tchilinguirian, oil strategist at BNP Paribas. “Open interest in oil is rising again as macro-oriented funds analyze the commodity case.”
JPMorgan is among the banks, saying it favors commodities as a hedge against inflationary pressures, while Bank of America Corp. considers that inflationary pressures are already helping to raise oil prices.
Recovery
The rally also spurred an increase in producer coverage, WTI for 2022 nearly $ 50 a barrel. Brent for the same period is already above that marker. Much of shale oil production is profitable at current levels, according to Fatih Birol, executive director of the International Energy Agency.
Along with the recovery of the activity, there was also a return of the number of market participants. Last week there were 163 long-term money managers in Brent and WTI, the most since February. That has risen from a low of 94 in March.
The change is good news for CME Group Inc. and Intercontinental Exchange Inc., which owns the world’s largest oil exchanges.
“Our WTI markets continue to reflect broad participation around the world as customers manage their global price risk,” said Peter Keavey, CEO of Energy Products at CME Group. “WTI remains the market choice for oil exposure management.”
Crude has had several reasons to be stimulated so far this year. A huge index The rebalancing was expected to see about $ 9 billion in the market last week as prices rose to a 10-month high. In addition, the weakness of the dollar stimulates renewed discussions about the supercycle of goods. Both JPMorgan and Goldman Sachs have recommended increasing exposure to the sector in recent days.
Of course, there are “a lot of manufacturers’ coverage, and some of that will change in some way,” said Paul Horsnell, head of product research at Standard Chartered Plc.
In addition, the short positions of swap dealers – a sign of banks managing the hedges they sold to producers – have risen to their level. the highest level since April last week.
And with forecasts of a global economic recovery this year, there is potential for more oil inputs. Brent and WTI open interest rates are still down about a third from a peak of $ 408 billion in 2018, but The World Bank expects a 4% growth in the global economy this year and a 7.9% growth in China, the world’s largest oil importer.
“Brent is the global benchmark for crude oil prices, so as global economic activity forecasts improve, we see strong demand for trading and risk management in the Brent futures market,” said Jeff Barbuto, global head of oil markets at ICE.