Oil price and the tanker crisis: the professional traders don’t care

Is the oil price currently still interested in the tanker crisis in the Gulf of Oman? Apparently not. The USA and Great Britain clearly blame Iran. UK Secretary of State Jeremy Hunt said yesterday that he was almost certain. The secret services have examined the case. It is not believed that anyone else could have carried out the attacks on the oil tankers than Iran. So, because we only know one bad guy, does that bad guy also have to be responsible? It is also interesting that Hunt, like the USA before him, did not prove Iran’s guilt. So we believe in it because Iran is evil anyway? What an impressive demonstration of the international community’s allegiance.

Oil price does not rise at all

Well, what about the price of oil? Was that influenced? Has it exploded due to the imminent threat of war in the Gulf and the resulting massive shortage of oil on the world market? Of course there can be war, but so far the futures market has been more than calm. Since the attack on the two tankers on Thursday WTI oil has risen by just 2 dollars. More than half of this increase has already been lost again. The WTI oil price is currently quoted at 52.18 dollars. Right now it seems to be tending to fall at least. The chart shows the oil price since June 5th. The rising price since the tanker attack and the subsequent falling price are shown on the chart.

The professional traders don’t look at the tanker crisis

Why is the oil price currently tending to fall? Just a few minutes ago a spokesman for the Iranian nuclear authority said that Iran would probably start enriching more uranium again on 27th of June. Even that won’t push up the price of oil at all. The professional traders, if we want to name them as such, take a look at the constantly filling crude oil deposits in the USA. This suggests a worldwide oversupply of crude oil. Also the international energy agency pointed out at the end of last week (read here) that the demand will probably weaken and the supply will increase.

CFTC data show urge downwards

Every Friday evening the U.S. Futures Commission publishes CFTC data on futures holdings. Which groups of traders (hedge funds, etc.) have how many long or short contracts in which product? For oil such data are published weekly. And the very latest data published on Friday shows that short bets on the oil contract have risen sharply. However, this data collection will only last until 11th of June, right before the tanker attack. The comparison between long and short contracts has been more pessimistic than it has been since February. Hedge funds increased their short bets on oil (WTI) by 46%.

Even if the CFTC data, as already mentioned, only last until 11th of June. The oil price trend since Thursday is now showing that the professional traders are more interested in economic data, inventories and other factors. But hardly anyone seems to expect a massive escalation in the Gulf. Of course, this can still happen. But please keep an eye on inventories, trade wars, GDP data, industrial orders and much more. And in the middle of next week the big OPEC conference in Vienna, which takes place twice a year, will start. Then the focus will be on whether OPEC + Russia will extend the production cuts from July to the end of 2019. The probability of this being the case is quite high. This could (not necessarily) help the oil price back on track. But is OPEC currently stronger than the fear of a slump in demand?

The Manifa Oil Field in Saudi Arabia. Photo: Saudi Aramco

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