A favored trade of the world’s hedge funds sunk as oil held close to 15-month lows with banking turmoil shaking confidence that a recovery in China will be enough to reinvigorate global demand.
(Bloomberg) — A favored trade of the world’s hedge funds sunk as oil held close to 15-month lows with banking turmoil shaking confidence that a recovery in China will be enough to reinvigorate global demand.
Brent’s December-December spread narrowed to its weakest level since December of 2021, amid fears of long-term diminished demand outlook. Even the oil market’s most ardent bull, Goldman Sachs Group Inc., no longer sees oil reaching $100 a barrel this year.
The bank lowered its Brent forecast for the 12 months ahead as rising near-term recession concerns, and an exodus of investor flows sharply lowered crude prices.
READ: Goldman Sachs No Longer Sees Oil Reaching $100 This Year
After trading in a tight range at the start of the year, crude has broken lower as the banking crisis magnified global recession fears and the resilience in Russian crude flows. The price slump has raised the prospect of intervention from OPEC+, though there’s speculation the group will stay on the sidelines for now.
“This has no longer anything to do with supply and demand,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S. “It is purely driven by worries and short sellers can ride that wave until the general level of risk appetite shows signs of stabilizing.”
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