Analysis-Oil prices turn more volatile as investors exit the market

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NEW YORK/LONDON : Traders and fund managers have left crude oil markets in recent months, dropping activity to a seven-year low amid the worst global energy crisis in decades as investors become unwilling to deal with persistently high volatility. The exodus of participants, especially hedge funds

NEW YORK/LONDON : Traders and fund managers have left crude oil markets in recent months, dropping activity to a seven-year low amid the worst global energy crisis in decades as investors become unwilling to deal with persistently high volatility.

The high volatility is delaying increased capital expenditures that would help supply keep pace with energy demand, said Arjun Murti, a veteran energy analyst. When volatility is high, oil companies have less confidence in price forecasts, he said. Overall open interest in the futures market has fallen nearly 20 per cent since the start of the Russia-Ukraine conflict, according to data from JP Morgan. Open interest in Brent crude futures at the start of August sat at 1.802 million contracts, the lowest since July 2015, according to Refinitiv Eikon data.

Forty-three percent of companies said energy budgets are the biggest operational area affected by supply-chain disruptions, which have stemmed recently from the coronavirus pandemic and geopolitics.

 

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