Americas News
Bearish Sentiment Cripples Oil Market Despite Modest Price Uptick
Monday's oil trading saw investors focus on the after effects of Hurricane Francine, in which over 12 percent of crude output in the Gulf of Mexico is still offline – and which caused two key benchmarks to eke out modest gains.
Why traders didn't react more vigorously to the hurricane while it was at its zenith last week, Matt Smith, lead oil analyst at Kpler, explained, "The impact is more on the production side than on refining, therefore, it leans a little bit bullish."
Brent settled up $1.14 at $72.75 per barrel, while West Texas Intermediate settled up $1.44 at $70.09.
Another analyst who tried to make sense of recent oil trading habits was Amrita Sen, founder and director of research at Energy Aspects; on Monday she acknowledged that demand concerns exist and may be justified to a degree, but the oil bearishness that has caused a sustained slump in prices of late has been overdone - as have analytical fears of undue massive supply growth.
She concluded that ,"Everyone is hating on oil right now," and added that "Risk reward is to the upside."
Meanwhile, data from the Intercontinental Exchangeverified that last week, negative sentiment gripped the oil market so severely that short positions on Brent overtook long positions for the first time in history (shorts totalled 164,223 contracts, while longs amounted to 151,543 contracts).
TACenergy echoed Sen's sentiment by stating, "With so much combined short interest, when the bidding does start, you can expect there to be some fast price spikes."
Next up for investors' consideration: the U.S. Federal Reserve's highly anticipated decision whether to cut interest rates, scheduled for Wednesday, with traders betting on a cut of 50 bps rather than 25 bps.
Tim Snyder, chief economist at Matador Economics, said, "For the next two and a half days, the markets will be collectively holding their breath."
In other oil news on Monday, UBS cut its oil price forecasts for the period 2024-2026, citing weaker global demand and a more stable supply outlook; UBS now sees Brent averaging $75 per barrel in both 2025 and 2026, a $5 per barrel reduction.
