Algorithmic hedge funds, using mathematical models to track trends in financial markets, have been among the major buyers of oil futures, pushing prices to record highs in more than a year.
Computer-controlled funds, known as commodity trading advisors, or CTAs, actually went all-in, receiving a signal to put a 100% limit on further price gains, Rabobank analysts write.
For the first time in more than a year, the one-year momentum indicator for Bren oil futures has gone from bearish to bullish, Rabo analyst Ryan Fitzmaurice notes.
“A change in this important signal effectively puts system traders into full-money trading on oil exposure, as all key signals — trend, moment and carry — have entered the bullish zone with confidence,” Fitzmaurice writes.
The models ordered the trading robot to take the longest possible long position, and these purchases were the driving force behind the latest wave of the rally, pushing prices up to $ 67 per barrel of Brent – the level of January 2020.
For other institutional players, however, the actions of the algorithms could provide a good opportunity to lock in some profit after oil prices soared by almost 100% in four months, Fitzpatrick said.
At 20.04 Moscow time, April Brent futures are trading in London at $ 64.66 per barrel, adding 0.3% per day and 25% since the beginning of the year.
WTI in New York depreciates by 0.15%, to 61.41 dollars per barrel (+ 27% since the beginning of the year).
In total, since the beginning of the year, hedge funds bought futures and options for 81.4 million barrels of Brent and 33 million barrels of WTI, and also closed short positions for 5.4 and 22.1 million barrels, respectively, follows from the statistics of the London ICE and the American Commodity Futures Trading Commissions (CFTCs).
As of the middle of last week, large speculators held contracts for 812 million barrels (with a nominal volume of $ 53.5 billion).
Institutional money flows like a river to commodity markets in search of inflation protection, but as a result, inflation only accelerates.
In the wake of large investors are retail traders: in the US alone, inflows to oil-oriented exchange-traded funds (ETFs) have reached $ 3 billion since the beginning of the year, helping oil prices “out of touch with reality,” Fitzpatrick said.
Moreover, private investors made the bulk of purchases after oil soared by tens of percent: money flowed into ETFs in January-February at prices of about $ 60 or above this mark.
The oil futures market is breaking records while the physical market is in short supply: according to the International Energy Agency, global demand exceeds production by 2.6 million barrels per day.
This, however, the market owes to the OPEC + countries, which continue to keep supplies by 7 million barrels per day below the pre-crisis level.
In the second half of the year, when the leading exporting countries begin to gradually turn the taps, the IEA predicts a surplus of 0.6 million barrels per day.