Oil traders ignore dwindling stocks to focus on economy

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Notwithstanding the inventory depletion, hedge funds and other money managers have become increasingly bearish about the outlook for petroleum prices

Oil prices have retreated in recent weeks as traders look past the current depletion in global inventories to focus on the future threat posed by a possible slowdown in the major economies.

Front-month Brent futures prices and the six-month calendar spread both weakened slightly over the second quarter, but were still above the long-term inflation adjusted average, consistent with a gradually tightening market. But the seasonal depletion this year was the largest since 2019, and among the largest in the last decade, indicating that global supplies likely continued to tighten at the start of the third quarter.

Regional stocks were still 5 million barrels above the 10-year average on Aug. 2 but the surplus had narrowed from 18 million five weeks previously. One reason is that portfolio investors have reacted negatively to plans by OPEC⁺ to unwind some of the group’s production cuts from the start of the fourth quarter.

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