Oil futures prices are still falling, largely due to sharply reduced demand from China. Traders are responding to this move with growing bearish sentiment. Consequently, net long positions on U.S. crude futures have plummeted even further, reaching the lowest levels since nearly 15 years. The diminishing demand for oil and grains from the world’s second-largest economy is sending jitters among commodities traders.
Recent figures are showing that Chinese commodity purchases, oil being the most prominent here, are on the decline. This significant decline is sending waves through nearly every market. Oil futures and grain futures prices are both dropping in response. As Beijing doubles down on electrifying its fleet, demand for legacy oil products is already being undercut. This transition is helping to shape a long-term, structural change in consumption patterns that traders are laser-focused on.
Thus, hedge funds and other speculative traders have become more bearish than ever on oil prices. Specifically, they responded to weakening demand out of China. Trade tensions and other geopolitical influences are creating new currents in the marketplace. They introduce yet another layer of complication to the mix. The cumulative effect of all these problems is sending oil futures prices plummeting.
The most significant source of downward pressure on oil prices analysts say is lower consumption in China, which is directly impacting the downward trend in oil futures prices. As our country moves away from oil to more sustainable energy sources, that positive appetite for oil grows weaker by the day. This development has put traders in an ever growing position of uncertainty over where they think oil prices are headed in the future.
That bearish sentiment among traders is clear in the market’s reaction to the bombshell that was dropped last week. Net long positions on U.S. crude futures have fallen to a historic 15 year low. This change underscores a profound and sudden loss of market confidence, driven primarily by the collapse in demand coming from China. As traders across the markets recalibrate their models and expectations, many are choosing to walk back from longs.