Hedge funds and financial investors have significantly increased their bets on rising crude oil prices, reaching their highest levels since last August. This strategic shift comes at a time of heightened uncertainty in global energy markets, driven by a range of geopolitical tensions and supply chain risks, from the Black Sea region to the Middle East.
A surge in purchasing power centers
According to the latest data compiled by Bloomberg, money managers increased their net long positions in the two benchmark crude oil contracts (West Texas Intermediate and Brent) by 15,487 contracts. This brought the total to 250,686 contracts during the week ending January 20. This level of optimism is the highest since last summer, a period marked by direct military tensions and exchanges of airstrikes between Israel and Iran, reflecting the return of a "risk premium" to dominate oil pricing in global markets.
American ambiguity and the Iranian issue
Markets are experiencing volatility due to mixed signals from the new US administration under Donald Trump regarding its approach to Tehran. Despite recent statements by Trump indicating he had received assurances that the Iranian regime would cease targeting protesters, and his relative softening of threats of "severe measures," financial markets remain unconvinced.
Analysts believe that traders' reluctance to reduce their long buying positions stems from fears of a sudden change in the US stance or an uncalculated escalation, especially since Iran is a major player in the global oil market, and any disruption to its exports would create a supply gap.
Supply crises in Kazakhstan and Venezuela
Concerns are not limited to the Middle East; they extend to other vital oil-producing regions. Recent US moves to remove Venezuelan President Nicolás Maduro have garnered significant attention, given Venezuela's considerable oil reserves (despite declining production in recent years) and the potential impact of sanctions on oil flows.
Meanwhile, Kazakhstan, a major oil producer in Central Asia, faced significant operational challenges. The country's largest oil producer was forced to suspend operations at the giant Tengiz and Korolev oil fields following fires at power plants supplying the fields. This sudden disruption adds further strain to already tight global supplies.
Impact of Russian infrastructure
The Kazakh crisis has taken on a more complex dimension, as the country had already reduced its production following drone attacks targeting a Caspian Pipeline Union loading terminal inside Russian territory. The gravity of this situation lies in the fact that Russia is the primary outlet for approximately 80% of Kazakh oil exports. This means that any security disruption in the Black Sea or on Russian soil immediately impacts Kazakhstan's ability to export its oil to global markets, reinforcing the likelihood of continued price increases in the foreseeable future.
