Sberbank CIB has analyzed the influence of speculators on oil prices


A significant volume of speculative positions has been oil prices, but does not guarantee further growth, analysts write Sberbank CIB Dmitry Kolomytsyn and Iskander Lutsk, in a review published Friday, 1 April.

According to the Commission on commodity futures trading (CFTC), the liquidation of short positions on WTI for the last seven weeks reached record proportions, and some investors have concluded that it will support a recovery in oil prices. The logic of investors is simple: the closing of short positions entail the redemption of the futures/options. Theoretically this could lead to the recovery of oil prices, in themselves, however, open interest in WTI does not stimulate the movement of oil prices and the conclusion based on analysis of historical correlation, remind analysts.

According to the CFTC, over the last ten years, in addition to the current time, there have been two cases when a short position declined seven weeks in a row. Both times the volume of the closed positions was less significant than it is now, but in the periods of oil quotations also went up, they add. Despite these trends, Kolomytsyn and Lutsk at this time I do not advise to take data on open positions as the basis of forecasting oil prices, if fundamental factors remain the same, say analysts. It would be better to focus on the perception of risks, as reflected by the trend of global stock indexes like the S&P 500.

In mid-February, two biggest oil-producing countries — Saudi Arabia and Russia — came to the first coordinated step from the beginning of the sharp decline in oil prices. Their agreement on “freezing” the oil production caused a on the market for more speculative inflows of liquidity, which, according to Intercontinental exchange (ICE), amounted to $5 billion. the News has caused growth of quotations more than $10/bbl, and the flow of funds active funds helped the price of Brent crude to stay in the range of $39,20–a 41.50/bbl, despite the data about growth of stocks of oil in the United States. She also contributed to the decline of one-month realized volatility with a six-month high at 80% to 45%, analysts remind.

In these circumstances, if scheduled for 17 April, the summit in Doha will not bring the desired results, the speculators can begin to close long positions that will lead to a drop in oil prices.