Sharp Increase in Oil Prices Expected Following Record Drop in Bullish Brent Bets

Overview

After a turbulent week for crude oil prices, largely due to OPEC+'s future plans for reintroducing some barrels to the market, oil prices are expected to rise sharply. Interestingly, this predicted rebound is not based on fundamentals but technicals. As noted by Bloomberg's Alex Longley, the positioning figures indicate that the selloff of Brent may have reached its peak.

Significant Decline in Net-Bullish Wagers on Brent

The chart below illustrates the significant drop in oil prices at the beginning of last week. This drop was fueled by the largest weekly decrease in net-bullish bets on Brent since ICE started publishing the data over ten years ago. This dramatic decrease is a clear indication of the increase in bearish sentiment and the extent of the technical selling that put pressure on crude. There was also a significant drop in the same figure for US diesel futures.

Optimism for the Future

Despite the relatively unimpressive physical market, oil bulls remain optimistic. They predict that things will improve over the summer as consumer fuel demand increases. Longley also points out that key timespreads that measure market health have shown signs of bottoming out over the past week or so.

Recovery on the Horizon

With positioning generally leaning towards the bearish side (the data is up to last Tuesday, suggesting that the recovery in prices from the lows would already indicate some fading of the bearishness), there is reason to believe that the sluggishness in oil is nearing its end.

Final Thoughts

This recent development in the oil market is intriguing. It highlights the complexities of market dynamics and the role of technical factors in shaping price trends. What are your thoughts on this? Do you think the predicted rebound will happen as expected? Feel free to share this article with your friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, which is every day at 6 pm.