After hitting a stage high of 91 on April 12Fowlplaygold.18 US dollars per barrel, 86.97 US dollars per barrelFowlplaygoldBrent and WTI crude oil futures prices showed a volatile downward trend, hitting an intraday low of $81.71 / barrel and $76.89 / barrel respectively on May 8.

The fall in oil prices has coincided with a big withdrawal of smell-sensitive funds. Data from the Commodity Futures Trading Commission (CFTC) and Intercontinental Exchange (ICE) show that the combined speculative net long positions in WTI and Brent crude oil futures fell sharply by nearly 120000 positions last week.

Industry insiders said that the sharp reduction of speculators' holdings and the departure of speculative bulls means that there has been a significant change in the future expectations of funds for oil prices.

High oil prices fall back

In the past January, the overall trend of international crude oil prices has been weak.

Since hitting a phase high of $91.18 a barrel on April 12, Brent crude oil futures prices have fluctuated, hitting as low as $81.71 a barrel, according to Mandarin financial data. As of 15:00 Beijing time on May 13th, the main contract for Brent crude oil futures was at 82.69 US dollars per barrel. In the same period, the futures price of WTI crude oil also fell from a high of 86.97 US dollars per barrel to a minimum of 76.89 US dollars per barrel, and the latest price was 78.17 US dollars per barrel. At present, the two are down 9.3% and 10.12% respectively from their April 12 highs.

Price trend of Brent crude oil futures since the beginning of this year

Price trend of WTI crude Oil Futures since the beginning of this year

Liu Shunchang, an analyst at South China Futures Energy, said: "the short-term geopolitical situation and weak demand are the main drivers of a phased correction in crude oil."

"on Friday, international oil prices failed to rebound further after rebounding near the key level. WTI crude oil futures stopped at just 4 cents from $80 a barrel, and night trading fell sharply from highs, further confirming the weak operating pattern of oil prices." Yang an, an analyst at Haitong Futures Energy Research and Development Center, said that the previous fall in oil prices between the end of April and early May put an end to the rebound in the first quarter, and oil prices not only recouped the risk premium brought about by geographical conflicts in the past. It also makes investors worry about the follow-up supply and demand pattern in the crude oil market.

There has also been a big withdrawal of olfactory-sensitive funds. The latest Commodity Futures Trading Commission (CFTC) position data showed that speculative net long positions in WTI crude oil futures fell 56517 to 82697 positions in the week ended May 7. In addition, last week, speculative net long positions in Brent crude oil futures fell 60125 hands to 260648 hands, according to ICE data. The speculative net bulls of the above two types of crude oil futures decreased by 116642 hands.

"on May 1, international crude oil prices fell sharply, forcing speculators to significantly reduce their holdings and speculative bulls left the market, which means that there has been a significant change in the future expectations of funds for oil prices." Yang an said that although oil prices rebounded briefly after last Wednesday, the sharp fall in oil prices at the key level on Friday showed that funds currently did not have the confidence to recover this level, and the weak operating pattern was further consolidated.

Weak shock is expected to continue in the short term.

Looking to the future, a number of industry insiders believe that oil prices will continue to be weak and volatile in the short term.

Li Yunxu, senior analyst of China Investment Anxin Futures Energy, believes: "the current oil price is mainly supported by OPEC+ oil production reduction policy, although it is difficult to falsify the expectation of going to the treasury during the peak season, but the performance of this round of seasonal depots in the United States is not smooth, and the operating rate of refineries is also relatively low. It is expected that oil prices will be driven by a more specific extended production reduction signal from OPEC+, and short-term recommendations are still treated with concussion and weak thinking."

Yang an also believes that before there are obvious factors to boost market confidence, oil prices are expected to continue to test the effectiveness of the downside support area, pay attention to the rhythm, and control the risk.

From a fundamental point of view, Liu Shunchang said that from the supply side, the OPEC+ oil production reduction policy is advancing steadily, and the overall change in production is small. On June 1st, OPEC+ will hold a production reduction meeting to formulate a production reduction plan for the second half of the year. If the demand expansion cannot be confirmed, it is likely that the production reduction plan will continue. In addition, Iraq and Kazakhstan will face compensatory production cuts of nearly 1 million barrels per day, the United States, Canada, Brazil, Guyana and other places have yet to see effective increments, Mexico has reduced exports, Russian petrochemical equipment has been frequently attacked by drones, and the United States has tightened sanctions on Iran and Russia and resumed sanctions on Venezuela.

From the demand side, Liu Shunchang believes that due to the low operating rate of refineries and the seasonal demand boost for gasoline has not yet arrived, gasoline cracking has fallen sharply in the short term, the short-term performance of diesel cracking is low, and the overall profit of finished products continues to decline. On the inventory side, both the United States and China showed depletion last week due to low refinery operating rates, but the rest of Europe and Asia maintained destocking. Geographically, the easing of the conflict between Iran and Israel has led to a fall in risk premiums.

"on the whole, at present, the lower support of crude oil prices is still there, and we can choose to do more when prices stop falling and stabilize." Liu Shunchang said.

Disclaimer: the content of this article is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.