Traders worldwide have been struggling to make sense of where oil prices are headed, juggling countervailing signals from major producers Saudi Arabia and Russia on the path for future Opec supply, against renewed US sanctions on Iran and Venezuela’s ongoing economic crisis. The market expected Opec to add to global supplies as sanctions reduce Iranian exports in coming months. But instead of bringing Brent closer in line with US crude, the opposite has happened, roiling both futures trading and key physical grades. On Thursday, US crude futures traded as much as $ 11 below Brent, the deepest discount since early 2015. Traders say the tide of light sweet crude from the US is threatening to swamp the global market.
That whipsawed traders in the last several days, as hedge funds and other money managers raised their bullish bets on US crude in the week ended May 22, while cutting long bets on Brent, the opposite of what has ended up happening. “The market doesn’t know where the price of oil is going to be and probably doesn’t know where it should be, and so it’s open to some major price fluctuations,” said Richard Hastings, an independent analyst in Charlotte.