Oil prices may spike as short positions unwind — BofA

Bank of America (BofA) analysts warn of a possible surge in oil prices following commodity trading advisors’ (CTAs) actions. A short-term rally could be sparked by short covering, which usually drives up demand in the market of deferred contracts and boosts prices, OilPrice explains. 

The website notes contradictory developments in the oil market. Despite OPEC+ deciding to hike production in July, prices are rising further, with the growth being driven by several factors. Wildfires in Canada have cut crude output, and geopolitical tensions have raised concerns about steady supplies. OilPrice experts believe speculators push prices up by raising their net long position. 

Meanwhile, HSBC warns against being too optimistic and points to a possible oversupply after summer ends. OPEC+ increases could result in a surplus in autumn when oil demand traditionally declines.