© Archyde.com. Oil bulls must get out of the market soon, as indicator suggests demand worries still play a role
On Thursday (December 8), international oil prices rebounded, breaking away from a nearly one-year low set overnight. However, demand concerns will still be the main threat to oil prices. The net long position of Brent crude oil contracts is close to the lowest level in nearly 10 years, and the oil price outlook will continue to be bearish.
At 16:49 Beijing time, NYMEX crude oil futures rose 1.08% to $72.79 a barrel; ICE Brent crude futures rose 0.83% to $77.81 a barrel. Both cities hit new lows since late December 2021 overnight, reaching US$71.75/barrel and US$76.91/barrel respectively.
Supply faces a new bottleneck as at least 20 tankers continue to face delays sailing from Russia’s Black Sea ports to the Mediterranean as operators race to comply with Turkish rules. Also helping to boost oil prices, data showed Japan’s economy shrank less than initially estimated in the third quarter.
“…but an overall cautious environment is likely to remain,” IG market strategist Jun Rong Yeap said on Thursday, adding that concerns over demand would remain the main threat to oil prices while positive catalysts were short-lived.
Hedge funds’ net long position in Brent crude oil contracts is near the lowest level in nearly a decade, with the ratio of long positions to short positions at its lowest level since November 2020, the latest CFTC data show.
Deputy Secretary Worli Adeyemo told Turkish Deputy Foreign Minister Sedat Onal in a phone call on Wednesday (December 7) that fulfillment of Russia’s oil price cap mechanism does not require any restrictions on the oil price cap through Turkey, the U.S. Treasury Department said. Vessels in territorial waters undergo additional inspections.
A mild start to the European winter has dampened demand for different fuels, including distillates such as heating oil used to generate electricity and heat homes. Overall economic activity around the world, including in the United States, also declined.
U.S. crude oil production rose to 12.2 million barrels per day last week, the highest level since August, the U.S. Energy Information Administration said on Wednesday (December 7). While U.S. crude inventories fell last week, gasoline and distillate stockpiles surged, adding to concerns regarding slowing demand.
In response to rising inflation around the world, the Fed has implemented a series of rate hikes aimed at cooling demand. Rising interest rates boosted the dollar, which weighed on oil prices as a stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.
