Traders are again flocking to oil and fuel futures and options after profit-taking on the recent surge in oil prices sparked by China’s reopening. Why: China again hopes the global economy can avoid a recession. But there is also a third reason. It’s a low fuel inventory.
February 5thth, the European Union imposes an embargo on Russian fuel. Russia is her EU’s largest supplier of fuel, and there is what seems to be a serious question as to whether the EU can easily replace Russian diesel. In particular, U.S. inventories of fuel, the backbone of any economy, are also tight. In addition, US diesel vehicle inventories will be even tighter once the maintenance season begins.
John Kemp of Reuters reported in the weekly magazine. digit Hedge fund buying saw the biggest spike in oil and fuel futures purchases since November 2020, the month the first Covid-19 vaccine was announced, reigniting hopes of an economic recovery.
But not all of those purchases were diesel fuel. In fact, it was mostly crude oil, and in total he was 44 million barrels of which he was 40 million Brent crude oil. In fuels, major traders purchased 11 million barrels of US gasoline, 8 million barrels of diesel and 7 million barrels of European diesel. This week, the focus will be on the Fed and ECB.
Both central banks are holding monetary policy meetings this week and both are expected to reveal further rounds of rate hikes. However, at least his Fed projections see a smaller rate hike of 25 basis points compared to the previous 50 basis point hike. The ECB is expected to continue aggressively raising interest rates by 50 basis points, as is the Bank of England.
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The news that the Fed is slowing its efforts to contain inflation is welcome, as aggressive rate hikes will not help boost oil demand and prices. Conversely, an announcement of a rate hike of more than 25 basis points is likely to shock the market. I got it in a report earlier this week.
Jeff Mower, director of Americas oil news at S&P Global Commodities Insights, told the Houston Chronicle, “The market is likely to see a 25-basis-point rise in the current oil futures price, so the Fed is likely to I will be watching your comments,” he said.
“For example, will the Fed hint at a moratorium on rate hikes, as the Bank of Canada did last week? That could be bullish for oil futures,” he said.
But a big part of oil traders’ renewed bullishness has to do with the economic outlook for China and the US. The reversal of Beijing officials’ corona-zero policy was like the first pistol for oil traders after a year of lockdown and uncertainty. There is now hope that the US can avoid a recession, even though the latest manufacturing data suggests. Otherwise.
International Monetary Fund this week enhanced These hopes, citing surprisingly resilient demand in Europe and the US, revise up global growth prospects. OPEC+, which takes place this week, has no plans to change production rates so far, which also contributes to the optimism.
Oil prices started the week lower on hopes of a central bank statement on interest rates and Russian exports continuing to perform well despite the EU embargo.devastating predict Production losses of more than 1 million bpd, and in some cases 3 million bpd or more, have not been realized, but that may change after the EU fuel embargo takes effect.
This is because, unlike crude oil, China and India are likely to significantly reduce their willingness to import refined products. And this means Russia will need to find new, smaller markets, which will lead to tighter global fuel inventories and consequently higher prices. Traders may be right to bet more on fuel. not.
By Irina Slav for Oilprice.com
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