Oil Traders Don't Buy The Saudi Cuts – OilPrice.com

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The Wall Street Journal reported this week that the Brent futures market had swung into a contango, meaning that spot prices for the benchmark crude had fallen below the futures price. What this suggests is that traders don’t really expect a supply squeeze anytime soon.
The latest factory data, as reported by Reuters earlier this week, revealed that factory activity had slumped across regions, notably in much of Asia and the eurozone, as well as in the UK. Activity increased in China, but the increase was, it seems, too small to impress oil traders.
Combined with central banks’ continued focus on rate hiking as a cure for inflation, the economic growth outlook for some of the biggest oil markets in the world is not looking good, and trader behavior confirms it.
Reuters’ John Kemp said in his latest column on oil trading that sentiment among institutional traders had not been so bad since 2020 when governments’ pandemic response wrecked oil prices as lockdowns destroyed demand.
The net position of institutional traders across the three most traded crude oil contracts—Brent, NYSE WTI and ICE WTI—had fallen to 205 million barrels at the end of June. This was the lowest since records began in 2013, Kemp noted. Related: Iran’s Growing Oil Production: A New Threat To OPEC’s Market Grip
It seems that despite conflicting forecasts on oil demand in the second half of the year, traders have picked the pessimistic road. OPEC and even the International Energy Agency, as well as most investment banks, expect a rebound in demand. Yet the World Bank warned last month that global growth would slow down during that same second half, dragged down by inflation and the response of central banks to it.