Ahead of tonight’s much-anticipated debate between Donald Trump and Kamala Harris, oil prices dropped over 3% to hit their lowest level since December 2021. With blame placed on collapsing Chinese demand and soaring supply—both claims which, according to some experts are unfounded, as a significant divergence has emerged between the physical oil market, where demand remains resilient, and the paper oil market, dominated by bearish speculation.
Oil plunged over 3%, with Brent crude dropping below $70 per barrel ahead of the Trump-Harris debate, hitting the lowest levels since December 2021.
While Chinese demand seems weaker and global supply is rising, there are suggestions that these concerns may be inflated due to short-term factors.
The physical market remains strong with supply tightening, while financial oil demand has plummeted by 7 million barrels per day, leading to a bearish paper market.
Hedge funds have slashed long positions to their lowest since 2011, reflecting growing bearish sentiment in oil markets.
The price of Brent crude has dropped below $70 per barrel, driven by macroeconomic concerns, including a disappointing U.S. jobs report and pre-debate volatility, marking the lowest levels since December 2021.
While the physical oil market shows signs of strength, with net supply falling by 0.6 million barrels per day due to reduced production from Russia and Canada and a moderate recovery in Chinese demand, financial oil demand has collapsed. Over the past two months, financial demand has plummeted by an average of 7 million barrels per day, leading to record short positions among funds and traders.
The American Petroleum Institute (API) reported a 2.8 million barrel drop in U.S. crude stocks and a significant 2.6 million barrel weekly draw from Cushing, the largest since August 2023. This puts Cushing stocks at near tank-bottom levels, indicating the possibility of a sudden surge in oil prices if these draws continue, potentially leading to an epic short squeeze in the near future.
Despite the current market conditions and the sharp drop in oil prices, Hedgify provides companies with critical tools to hedge against this volatility, ensuring they remain shielded from unpredictable swings in commodity prices.
The information provided in this market insight is for general informational purposes and should not be considered financial advice. It is not intended to offer any financial recommendations or endorsements. Any decisions made based on the content are the sole responsibility of the reader.
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