Investors Dumped Oil as
Banking Crisis Erupted
Reuters
Portfolio investors dumped petro
leum futures and options atone of
the fastest rates on record in the
early stages of the banking crisis,
as traders anticipated an increa-
sed probability of a recession hit
tingoil consumption.
Hedge funds and other money
managers sold the equivalent of
139 million barrels in the six most
important futures and options
contracts over the seven days en-
ding March 14.
The volume of sales was the 12th
largest in the 522 weeks since ICE
Futures Europe and the U.S. Com
modity Futures Trading Commis-
sion started to publish records in
this form in 2013.
Fund managers have sold a total
of 148 million barrels since the end
of January, takingtheir
combined
position to 432 million barrels
(20th percentile for all weeks since
2013).
In the most recent week, there
were heavv sales of Brent (.65 mil.
more U.S. banks expected to ex-
pand their balance sheets over the
next six months (26 out of 80 insti-
tutions)than reduce it (8 of 80), ac-
cording to the Federal Reserve'
Senior Financial Officer Survey
As recently as January 2023, only
a minority of banks said they had
tightened credit standards, impo
sed tougher conditions or increa-
sed spreads over the last three
months, according to the Fed's Se-
nior Loan Officer Opinion Survey.
In the wake of the banking crisis
however credit conditions in
WTI(-59 million), U.S. gasoline (-12 North America and Europe are set
million) and European gas oil (-7 to tighten significantly as banks
million), with only minor buying fortify their balance sheets to pro-
of U.S. diesel (+4 million). tect themselves against possible
Investors have become much mo- runs..
re cautious about the outlook for
oil prices since the end of January Stress-driven tightening will
amplify the tightening already un-
inresponseto persistent intlation, derway as a result of central-bank
risinginterest rates anda crisisof driven interest rate increases.
confidence engulfing banks in Reduced c lit availability to ho
North America and Europe. useholds and businesses,
Bullish long positions outnum- the most hitting
ber bearish long positions by a ra- marginal borrowers har.
dest, is
anextraheadwind that will
tio of 3.42:1 (37th percentile) doWn
from 5 92-1 /g0th aontil likely lead to slower economic