Trafigura says ‘fragile’ oil market may be prone to price spikes as higher interest rates and underinvestment squeeze the market according to a Bloomberg article
- The consensus view is for prices to remain near current levels, but the market is “more fragile than it looks,” Ben Luckock, the co-head of oil trading said in an interview at APPEC in Singapore. Brent crude is nearing $90 a barrel after OPEC+ heavyweights reduced supply — curbs that could continue further. - “One reason is underinvestment in new oil production,” he said on Monday. “Combined with higher interest rates, which make it more expensive to hold oil in storage, it means there isn’t much slack or flex in the system. Put all together, and you have a market that’s susceptible to price spikes.” - Oil options traders are showing confidence in the recent sustained surge in prices, bolstering wagers that crude will rally toward $100, even as questions remain over China’s outlook. However, Luckock and other attendees at the conference said it wasn’t all bad when it came to nation’s economy.
Crude Oil $100 calls over the next year have seen their open interest rise to 120,000 as of Thursday. $90 and $100 calls are also the 2 most held strikes over the next 12 months
Source: Barchart, Bloomberg
More or less in tandem: US 10y yields and WTI oil price
Source: Bloomberg, HolgerZ
Crude Oil cannot be stopped! It just had its 7th consecutive green week, its longest winning streak since February 2022
Source: Barchart
With the recent surge in oil demand, the US government is now left with a petroleum reserve sufficient for only 16 days
Source: Tavi Costa, Bloomberg
Crude Oil had its 6th consecutive green week, the longest weekly winning streak since February 2022
Source: Barchart
As highlighted by Tavi Costa, the implied demand for oil just surged to all-time highs
It was the largest weekly increase in 26 years. Meanwhile, US oil production remains ~7% below pre-pandemic levels with total operating rigs starting to contract for the first time in 3 years. Source: Bloomberg, Crescat Capital
The supply story in oil is getting worse
Source: MenthorQ
