OPEC+ Isn’t Panicking About #Oil’s Sudden Drop — Yet
Crude’s decline is being blamed on speculative money exiting the derivatives market, rather than economic fundamentals (1/6)
#COM
bloomberg.com
Crude’s decline is being blamed on speculative money exiting the derivatives market, rather than economic fundamentals (1/6)
#COM
bloomberg.com
Any post mortem of the recent crash points to a self-fulfilling wave of selling focused on futures and options, rather than the physical market. First, large investors lifted their inflation hedges as the US Treasury market crashed.
The wave of selling stopped out some bullish commodity hedge funds, which in turn made them forced sellers, forcing oil benchmarks even lower. That’s when things got really ugly — because the options market came into play.
US refining margins, have remained very strong during the sell-off — evidence that underlying demand remains healthy. And the shape of the Brent futures curve stayed stronger than in December when oil prices last fell sharply. Perhaps, just perhaps, the decline is overdone.
OPEC+ officials believe that the derivatives market will remain turbulent for some time. But ultimately, the strength of the supply-and-demand imbalance expected in the second half of the year should reassert itself, leading to higher prices
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