Standard Chartered names conditions for further oil price growth — OilPrice

Oil prices rose amid fears of a new escalation between the United States and Iran. November-delivery Brent futures climbed 1.70% on Monday to $106.09 per barrel, while WTI gained 0.95% to $93.29. OilPrice reports.

Record long positions

Standard Chartered analysts noted that Commodity Trading Advisors (CTAs), algorithmic trend-following funds, hold maximum long positions in Brent, WTI and major refined-product markets. According to the bank, such positioning has been recorded only several times over the past decade.

Standard Chartered believes that systematic buying, which supported the previous rise in oil prices, has limited potential to continue. A new increase in prices now requires an additional physical shock to the market, including further infrastructure damage, a prolonged reduction in flows through the Strait of Hormuz, or signs that existing export arrangements are unable to maintain supplies.

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Risk of correction

At the same time, the unwinding of crowded long positions by funds could cause prices to decline. In Standard Chartered's view, the likelihood of consolidation or a sharp sell-off will increase if flows through the Strait of Hormuz normalize or Saudi Arabia restores export volumes.

The bank also drew attention to the tight situation in the refined-products market. The retail price of diesel fuel in the United States exceeded $6.50 per gallon, up 83% since the start of the year and almost a dollar higher than a month ago. Gasoline approached $4.50 per gallon, gaining 58% since the beginning of the year. Standard Chartered forecasts that restoring the lost refining capacity of the Russian Federation, an aggressor state, would take months even if Ukrainian strikes on Russian energy infrastructure ceased immediately.

Europe's gas market

European natural gas prices recovered on Monday from a three-week low and stood at €74.26 per MWh. Standard Chartered called the previous decline to around €70 premature amid unverified reports of a possible opening of the Strait of Hormuz: neither side has confirmed an agreement or a timeline for its opening. Analysts added that gas inventories in Europe remain below their usual level, which, in their view, will support prices.