Oil prices continued their decline ahead of a June 22 meeting of OPEC and other producers that will discuss raising production to avoid political action in consuming countries to lower oil prices.
As of 1:15 p.m. in New York, U.S. benchmark West Texas Intermediate was down 1.55% to $64.79 a barrel and international benchmark Brent was lower by 1.73% to $75.46. Those moves also represent a widening of the spread between the two oil benchmarks. Powering that increase in the spread is a transportation bottleneck in the Permian Basin, which has left some of the surging production from oil shale producers in the area with no route to market.
This all comes after an unofficial meeting of Saudi Arabia and other producers on Saturday that stressed the need to stimulate adequate investments to ensure stable oil supply. The weekend also brought calls from consumer nations for lower oil prices. President Donald Trump has called oil prices “artificially very high” and India has seen calls for price caps on gasoline and diesel fuel. In Brazil a truckers strike that is, at least in part, over higher fuel costs led to the resignation of the CEO of the state oil company on Friday.
Hedge funds have moved to reduce their net long position in West Texas Intermediate in the futures market. The long position fell by 10% while short positions rose by 29% in the week ended May 29. That’s the highest level of shorts since November. Total bets on West Texas Intermediate–long and short–fell to the lowest level since last July.
The Energy Select Sector SPDR ETF (XLE) was off 0.86% as of 1:10 p.m.
My thought after looking at the way the market is positioned is that it’s late to go short oil, although I think oil prices are likely to continue to drop in the run up to the June 22 meeting.