"The drop came as markets reacted to the new war initiated by the United States against Venezuela, where investors are increasingly concerned about the risk of further oversupply should the US gain control over Venezuela's vast crude reserves, the largest in the world. The oil market was already overwhelmingly bearish even before the raid on Venezuela. I made this point earlier on Sunday and continue to emphasize this hypothesis."
"According to the CFTC's Commitments of Traders data, long non-commercial positions in NYMEX WTI crude oil futures have fallen to a 2010s low, while non-commercial short interest is hovering near a 2017 high. By contrast, commercial participants are hedging against rising oil prices, with long positions near a 2021 high, despite having nearly doubled their hedge since late 2022. At the same time, they have neither materially increased nor reduced their hedges against falling prices since 2023."
WTI crude oil declined 0.7%, marking a third consecutive day of losses as markets reacted to a new US-initiated conflict in Venezuela and concerns about potential oversupply if the US gains control of Venezuela's vast reserves. The oil market was heavily bearish before the raid. CFTC Commitments of Traders data show long non-commercial positions in NYMEX WTI at a 2010s low while non-commercial short interest sits near a 2017 high. Commercial participants have increased long hedges to near 2021 highs and nearly doubled hedges since late 2022, while short protective hedges have been stable since 2023. Speculators price a deeper downturn while commercials treat upside moves as risk. Ongoing Russia-Ukraine tensions and potential Iran-Israel hostilities raise further supply disruption risks.
Read at London Business News | Londonlovesbusiness.com
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