Energy supply risk premiums continue to fade from crude oil prices, but the setup for a tactical bounce is strengthening, notes Daniel Ghali, Senior Commodities Strategist at TDS.
Rebound risks are strengthening
“Traders have concluded that this chapter of the Middle East conflict is over, despite continued risks around a potential escalation of retaliation and, notwithstanding its limited implications for global oil markets, some evidence that infrastructure energy at the Abadan refinery could have been damaged during the attacks.”
“Our returns decomposition framework highlights that during yesterday’s session, supply risk premiums subtracted approximately -4.5% from Brent crude oil prices, while CTA selling activity added almost -1% to “However, looking forward, the setup for a rebound is strengthening.”
“Trend-following algorithms are now ‘maximally short,’ continued evidence of reflationary tailwinds in demand may ultimately provide a crosscurrent to ongoing supply risk headwinds, and our simulations of Future prices suggest that almost all scenarios over the next week will lead to algorithmic buying activity in the Brent crude markets.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
