Americas News
Oil Posts Quarterly Losses As Analysts Lament Psychology Rejecting Bullish Sentiment
Oil on Friday earned the dubious distinction of posting a fourth straight quarterly loss, with economic concerns all but obliterating any reaction to bullish market news that has emerged over the past few weeks - to the dismay of some noted analysts..
Brent settled up 56 cents, or 0.8 percent, to $74.90, but in the three months to the end of June the contract for August delivery finished down 6 percent.
West Texas Intermediate settled up 78 cents, or 1.1 percent, to $70.64 per barrel but posted its second straight quarterly drop, down about 6.5 percent in the last three months.
The daily gains were attributed to earlier news that in the U.S. the Consumer Price Index grew by 4 percent in the year to May, the slowest pace of inflation in over two years – even though it's still double the Federal Reserve's 2 percent target for annual inflation and almost assures more rate hikes.
Friday's gains were also said to be bolstered by upward revisions in demand for crude oil and refined products in the U.S.
HSBC analysts explained crude trading sentiment by stating in a note, "Prices have largely remained below $80 per barrel as the market has been driven less by fundamentals and more by macroeconomic concerns.
"We think this will continue to be the case for part of the summer, although the deep deficit of around 2.3 million barrels forecast for the second half of 2023 should help to spur some upwards price momentum."
Other pundits noted that Brent and WTI haven't exhibited the strength of other commodities in 2023, and Jeff Currie, global head of commodities research at Goldman Sachs, believed that this is because both these grades are used heavily in petrochemicals, the market of which has been weak after heavy plastic purchases during the pandemic lockdowns – and something that is continuing to have a knock-on effect on upstream market prices.
Currie also suggested that psychological factors are responsible for tepid oil trading of late: "People are unwilling to embrace the bullish view; I think that needs to occur before you can really go to the next level."
For his part, Bill Perkins, CEO at Skylar Capital Management, argued that crude oil is underpriced, pointing out that "We have pretty much robust economy despite a lot of the fear and naysaying…we have population growth which is energy growth, and we don't have production growth and investment."
He added, "Even in a monetary cycle if you look historically, not a financial crisis, demand grows."
Both analysts agreed that market sentiment will shift to being much more bullish once it becomes apparent that global supply is falling, and Currie expressed optimism that crude prices will climb above $100 in the foreseeable future.
