- Oil speculators cut their net long positions in Brent and WTI due to concerns over China's economy.
- A rocket attack on the Golan Heights caused a temporary price increase but failed to offset China worries.
- OPEC+ is expected to maintain its current production policy at the upcoming JMMC meeting.
Growing concerns about China’s economy and oil demand prompted traders to head for the exit and reduce their net long positions in both key benchmarks last week.
Speculators reduced their net long position – the difference between bullish and bearish bets – in ICE Brent by 37,541 lots over the latest reporting week to July 23, leaving them with a net long of 146,349 lots as of last Tuesday, ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Monday.
Traders also dumped WTI Crude, with the net long position in NYMEX WTI slashed by 24,312 lots to 239,237 lots.
“Concerns over Chinese demand have led to these speculative outflows,” ING’s strategists said, adding that crude oil wasn’t the only commodity to see traders heading for the exit. Metals have also suffered due to the concerns about the Chinese economy.
Early on Monday, oil prices rose at the start of trade as a rocket strike on the Golan Heights rekindled fears of a conflict escalation in the Middle East.
On Saturday, a rocket strike on the Israel-annexed Golan Heights killed more than a dozen people. Hezbollah denied responsibility for the attack but the Israeli government has threatened retaliation against the Lebanon-based group, sparking the latest round of escalation fears.
Yet, the price move higher was modest in early European trade, amid lingering concerns about global, and most of all Chinese, demand.
Apart from the Middle East and China, the market will be watching this week the August 1 meeting of the Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market. The panel is not expected to recommend any changes to the current production policy plan of the group.
Most market observers reckon that OPEC+ would wait to see how summer demand will have held up by September, before potentially starting to unwind part of the current production cuts.
In early June, the OPEC+ group decided to extend most oil output reductions into 2025. But it also said it could begin unwinding some voluntary cuts after the end of the third quarter of 2024—subject to market conditions.