Weekly price gain points to shift in market sentiment

The month of drama in the oil markets appears to be at an end finally, as prices recorded their first weekly gain since the start of April. While sentiment is improving, market fundamentals have not as the oil surplus needs time to be absorbed from the market as economic activity recovers. A similar glut of crude oil and petroleum refined products will also need some time to be depleted. Historical OPEC+ output cuts have just started and are yet to make an impact on market fundamentals, but they have nonetheless affected market sentiment. Hence, oil prices rose as global production cuts deepened and signs of a fledgling demand recovery emerged.

The start of May loading means lower production and fewer barrels to the market from OPEC+ and other non-OPEC producers, and this will have a huge impact on the gradual rebalancing. The market has been waited anxiously for the start of May barrels. Stronger transportation

fuel

US data showed the biggest weekly jump in demand in almost a year.

demand from the US, China and Europe is helping to support a boost in fuel use and refining rates. This demand rebound has improved the physical market noticeably.

In fact, data from the US showed the biggest weekly jump in gasoline demand in almost a year last as stockpiles of the fuel shrunk. Refining margins are likely to improve in the second quarter as countries reopen businesses that were closed by efforts to contain the pandemic. Still, it may take some time to restore refined product demand that has nosedived as a result of lockdowns.

The latest Commodity Futures Trading Commission report shows that “long positions” are still very high at 704,116, dropping by just 1,890 contracts, compared with the previous week.

It is important to note that a high number of long positions is very significant for the market because eventually they need to be sold, and when such contracts are sold, oil prices will drop.