According to investors’ expectations, an oil price cap for the U.S. and EU will reduce Russian crude exports to the level allowing to compensate a negative influence of an economic slowdown on the energy source’s consumption. Supply cuts will potentially increase demand, thereby spurring price growth.
During the week to November 8, a number of hedge funds and other investment organizations purchased six of the most important petroleum futures and options contracts worth the equivalent of 41 million barrels.
Since the end of September, fund managers, in general, became one of the largest petroleum buyers, purchasing a total of about 169 million barrels. The fund’s “bullish” strategy shows their optimistic outlook towards price growth, but also demonstrates low levels of conviction.
The U.S. Strategic Petroleum Reserve (SPR) is gradually decreasing, thereby limiting available supplies of crude oil. However, as analyst at Reuters John Kemp stated, in the current situation the drop in supply might compensate for weak demand, caused by the economic slowdown, and support oil prices.