The emerging good news on vaccines largely dispelled short-term concerns about crude oil demand. According to the latest data released by Johns Hopkins University, 171000 new confirmed cases were added every day in the United States last week, up 54% from the average level two weeks ago. The number of cases in 50 states and regions is on the rise, putting pressure on hospitals and the medical system. It was widely expected that the rapid spread of the virus would inhibit Thanksgiving Day activities across the United States and weaken holiday related gasoline demand growth.
Novel coronavirus pneumonia, Paterson, director of ING commodity strategy at Holland International Group, believes that although the European situation is in a state of closure and the number of new crown pneumonia confirmed in the United States has exceeded 12 million marks, the positive progress of vaccine research has led to a few hopes for the public to solve the crisis of public health in the 12 million place.
The derivatives market has begun to anticipate changes in the supply and demand situation. Brent crude oil contract premium in the past six months has narrowed to 31 cents, a new low since mid June. The contract premium of WTI crude oil in recent six months has also dropped to 61 cents, reflecting that traders believe that the continuous overcapacity is fading.
At a time when demand is expected to pick up as the economy recovers, it is also possible to limit production on the supply side. OPEC will meet on November 30 and December 1 to discuss the current production reduction agreement. OPECs Joint Technical Committee issued a statement on the 16th of this month, saying that it believed that the risk of the oil market was downward due to a new round of blockade caused by the resurgence of the new crown epidemic, and suggested that OPEC should consider delaying its production increase plan by 3-6 months.
Hedge funds bought the equivalent of 69 million barrels of oil futures and options contracts in the week ending November 17, according to exchange position data. Buying mainly focused on Brent crude (+ 51 million barrels), which reflected confidence in the global economic outlook. In addition, WTI (+ 3 million barrels), American gasoline (+ 7 million barrels), American diesel (+ 1 million barrels) and European Gasoline (+ 6 million barrels) also showed long overweight.
Hedge funds have bought 182 million barrels of crude oil in the last two weeks, with a total position of 539 million barrels, the highest level since the beginning of September. With the hope of a rebound in oil consumption driven by vaccines, the bearish sentiment of institutions on crude oil and fuel prices has been greatly reduced. In the week after Pfizers vaccine news, institutions began to close their short positions previously established, and since last week, fund managers have begun to establish new bullish long positions.
It is worth mentioning that after buying crude oil in the additional positions, the net position of hedge funds in crude oil is only 44% of the average since 2013, which is far lower than that of the end of the second quarter and the beginning of the third quarter. This shows that if future news about vaccine testing and deployment remains encouraging, fund managers still have a lot of room to increase their bullish positions. The potential risk for current oil prices is that the market overestimates the speed at which successful vaccine trials are translated into community immunization and the return to normal business and international aviation. Vitolgroup, the worlds largest independent oil trader, said global oil demand should be able to return to pre epidemic levels by the autumn of the northern hemisphere next year. Russellhardy, Vitols chief executive, believes that the blockade and the subsequent economic activity reduction will be sufficiently eased by the fourth quarter of next year, raising oil demand to about 101million barrels a day, and currently the global demand for oil per day is about 96million barrels. Source: first editor of financial responsibility: Yangbin_ NF4368
It is worth mentioning that the net position of hedge funds in crude oil is only 44% of the average level since 2013, far lower than the level at the end of the second quarter and the beginning of the third quarter. This shows that fund managers still have a lot of room to increase their bullish positions if future news about vaccine trials and deployment remains encouraging.