Speculators trading derivatives based on oil and fuel price moves have taken the most bearish positions on oil prices since 2011, according to Bloomberg, indicating they see a recession ahead that will tank oil prices.
Their bets on the price outlook for diesel and refined petroleum products are the most negative since the COVID War began.
Sixty-five percent of worldwide fund managers expect the U.S. economy to weaken this year, according to Bank of America’s most recent survey.
Derivatives market players expect the U.S. Federal Reserve’s aggressive slate of interest-rate increases will provoke a recession and that China’s economy will remain sluggish, especially in the context of a U.S. recession and general worldwide economic slowdown, Bloomberg said.
Also, the possibility that the U.S. will default on its debts, technically or outright, factors into the gloomy outlook.
“It’s pretty remarkable to see this type of positioning,” energy and commodity portfolio manager Greg Sharenow at Pacific Investment Management, told Bloomberg.
Oil producers, fleet managers, and other commercial traders are more optimistic, with some even seeing prices rise.
If bulls are right and oil prices suddenly jump—if the global oil supply falls short, for example—that could spark as much as a $40-billion buying frenzy among commodity traders, Goldman Sachs analysts wrote in a recent note to clients.
In that case, oil bears would scramble to dump their positions, crashing the derivatives market.
TREND FORECAST: Oil prices ticked up last week but the longer-term outlook is for continued weakness, due to looming recessions in various parts of the world and the overall global economic slump.
OPEC+ will continue to manipulate supply to maintain prices above $70 per barrel. Even if the world economy collapses, they will do all they can to keep oil prices high.