Selling

There has been a heavy air across the energy complex through the tail of the summer, selling all round. Net long speculative positioning is reportedly closing in on the lowest level since the data came into being. Yikes. Hedge funds, who else, have been on the offer for weeks on end. As ever with the smoky goings on in the crude hut, it’s not exactly clear as to the reasons why. It’s not like wider macroeconomic worries are new, indeed, prices appear to have flared off any war premium. Perhaps one explanation is a pick-up in exports out of OPEC+, but then, that could be explained because they overshot to the downside through August. Perhaps inventories, which printed builds in September and October contrary to expectations, are to blame. Or maybe China. If all else fails stick the blame on China, perhaps due to some widespread ‘destocking’. Either way, weakness begets weakness. Futures selling puts off any physical buying and before you know it, sentiment is battered, and the hedge funds are fighting over the last taxi in the rank. Prices have picked up of late, but observers suggest that for a sustained rally, watch inventories and signs of a chunky drawdown. Near term there clearly appears to be a few loose barrels around but given the recent corporate activity in the space, coupled with the shuffling shoes of many governments as they step away from their go-getting net-zero targets, long term demand is, if anything, likely to continue going up. The near term economic data may attract the meaty breath of short term traders, but for those who play a longer game, see the statistics on developing world consumption for details. Position accordingly.