World’s largest oil trader predicts higher prices

China’s Restocking Effort May Be Oil’s Next Bullish Catalyst
– China does not seem to be as sensitive to high oil prices as South Asian countries.
– Latest Fund Manager Positioning Shows There is Still Room for Longer Oil Positioning
– Even after hitting $93 a barrel last week, oil prices still have room to rise in the coming months, with the major investment banks’ $100 oil forecast now in sight.
Strong oil demand and fund managers’ leeway to extend their long positions in the crude complex, combined with shrinking global spare production capacity and “worrying” inventory levels, could push prices higher. oil prices even higher, the world’s largest independent oil trader, Vitol Group, said.
The recovery in demand and the slight impact of the Omicron variant on consumption, alongside the Russian-Ukrainian crisis and a deep freeze in Texas which disrupted part of the Permian oil production, sent the WTI Crude to over $92 a barrel at the end of last week, while Brent Crude reached $93, levels at which benchmarks continued to trade early on Monday.
Geopolitical tensions aside, market fundamentals look solid and China could gain strength if it decides to rebuild some of its crude reserves, Mike Muller, head of Vitol Asia, told the Daily Markets Video Podcast on Sunday. the energy of Gulf Intelligence.
China could start to fill its crude inventories, even at $90 a barrel of oil, as replenishment may be needed, the executive of the world’s top oil trader said.
“I think it’s fair to say that China is at the minimum operational level in terms of the prescribed level of mandatory storage that state-owned companies are supposed to hold,” Muller said on the Gulf Intelligence podcast.
“All eyes are on what happens in China after the Chinese New Year as there is a feeling that restocking will be needed,” he added.
“If you look at spot behavior at the forefront of the market, it doesn’t look like they’ve had their foot on the pedal. Until the very last day before the Chinese New Year, public companies seemed interested in buying crude at these prices,” Muller said.
Moreover, according to the Vitol executive, China does not seem to be as sensitive to high oil prices as South Asian countries.
Overall, the forward futures price structure is so retrograde that “the market is telling you: be careful, don’t go short because you are a disruption, a refinery moving away from markets that are getting even stronger” , Muller noted.
Along with the potential for Chinese restocking after the Chinese New Year festivities end this week, the most recent fund manager positioning shows there is still room for longer oil positioning, according to Vitol and his colleagues. analysts.
In the last reporting week to Feb. 1, speculators were net sellers of crude oil for the third week. The net long – the difference between bullish and bearish bets – on WTI rose 6,400 lots, but the Brent net long fell 13,000 lots in the week to Feb. 1.
Thus, the combined net buying of the two most traded benchmarks was reduced slightly to 533,000 lots, some 200,000 lots below the peak in June when prices traded down 25%, said Sunday. Ole Hansen, Head of Commodities Strategy at Saxo Bank.
“WTI and Brent both reached new cycle highs above $90, with rising first-month spreads signaling heightened tension. The combination of tight supply, inflation, a weak dollar and the current turmoil in stocks and bonds has likely resulted in increased demand from paper investors, asset managers and speculators. large funds looking for a safe haven to help weather the storm currently blowing through their traditional investment portfolios,” Hansen said in a weekly commodity market analysis on Friday.
According to ING strategists Warren Patterson and Wenyu Yao, “The options market is also proving supportive, with sellers of the $100/bbl calls expected to hedge as the market moves closer to the $100/bbl level. “.
$100 oil is in the cards this year, and it could be hit as early as the second quarter, according to Bank of America, for example.
Tighter market balances, coupled with declining spare capacity, have made a growing number of investment banks more bullish on oil. Major Wall Street banks, including Goldman Sachs, Bank of America, JP Morgan and Morgan Stanley, expect prices to hit $100 a barrel as early as this year.
Paraskova reports for Oilprice.com

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