Oil market sets records in anticipation of November 30
Wagers on higher and lower prices held by speculators and hedgers reached 1.47 million contracts in the week ended Nov. 15, the most since 2007, US Commodity Futures Trading Commission data show.
“There’s tension in the market, with both producers and consumers worried about what OPEC does or won’t do on November 30. They want to be protected from surprising price moves," Bloomberg cited an energy analyst at Citi Futures Perspective in New York, Tim Evans, as saying.
Shorts climbed 14% while longs rose 8.1%.
Investors assume the possibility of OPEC countries reaching an agreement on the oil production levels at a meeting to be held on November 30 in Vienna.
The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking with a correspondent of Vestnik Kavkaza, explained that waiting for any significant changes in the market always cause the increase in the number of transactions.
"Investors, especially speculative, trying either to cash in on the alleged change in price or to minimize their risks. That is, one part of investors tries to take risks, predicting an outcome. And the other part of investors, on the contrary, tries to reduce its risks by selling the existing futures on current prices, expecting a reduction or stabilization," he explained.
Thus, according to the expert, the trading volume always increases due to these two groups of investors. "But in terms of overall market dynamics it generally does not seriously affect annual and even monthly rates," Belogoryev said.
We should not expect a new surge of revival in the markets after the meeting, the deputy director of energy policy of the Institute of Energy and Finances pointed out. "Any increase or decrease in prices at the oil market is laid in previous price movements, not to the next one. And nobody expects a radical change from the meeting on 30 November," he said.
The fact is that, on the one hand, OPEC's capabilities to increase production significantly decreased, on the other hand, the OPEC countries have not yet been able to achieve a compromise on the distribution of production quotas.
Alexei Belogoryev added that in any case the production decline by quotas will not lead to such a significant change in the global market, as it could two years ago.
Sberbank CIB analyst Valery Nesterov said that a surge of activity in the market is natural. "Speculators are not interested in a zero profit, they want to make money, and something's supposed to be happening in the market," he said.
The current increased activity is linked to the importance of the OPEC meeting. "This issue is extremely important for the market, it has been widely discussed by the media and market participants for a year. It is impossible to guess whether the agreement will be signed, and even if it is signed:. whether it will be a formal agreement, or just a verbal assurance," the expert said.
However, despite the importance of the topic, we should not expect significant growth in oil prices, the analyst warned. "Yes, there can be a short-term surge, if OPEC decides to freeze output. On the other hand, we can see the information that there are a lot of tankers, which oil isn't in demand, including in the North Sea. We see the unwillingness of most exporters to produce a lot of oil, we see the continued low demand. And the overall state of the global economy does not inspire hope for a serious increase in demand. That is why the price is taking these realities into account, and if there is a surge, it will be only a short-term and speculative," he said.
"Yes, now OPEC must take a decision to save its reputation. But if the price was stable about $50, it is very likely that they would not do anything. If the price collapsed below $40, there would be a situation in which OPEC would act not only to save reputation, but for the sake of survival of a number of countries, which incomes would have fallen sharply," Nesterov added.