Energy Investors Show a “Decisively Bearish” Sentiment

Crude oil prices remained largely stable on Monday amid escalating tensions in the Middle East, raising concerns over potential supply disruptions in the region.

As of 08:30 ET, Brent crude was trading around $74.51 per barrel, while West Texas Intermediate (WTI) futures saw a slight increase of 0.2%, reaching $70.21 per barrel.

Traders appeared to be factoring in a risk premium for oil prices as military actions continued in Gaza and Lebanon, with fears of an escalating conflict potentially impacting oil supplies. Hezbollah recently threatened retaliation against Israel following reports of the detonation of several electronic devices attributed to the group.

The ongoing violence and war threats have intensified concerns that a larger conflict in the Middle East could disrupt supplies, leading to tighter global markets. Crude prices have rebounded over the past two weeks from near three-year lows, driven in part by supply concerns linked to Hurricane Francine.

Nevertheless, analysts from Bank of America indicated that “sentiment among energy investors has turned decisively bearish.” This shift is attributed to the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, planning to phase out additional voluntary production cuts. The oil cartel aims to gradually restore 2.2 million barrels per day between December 2024 and November 2025, although this schedule was previously postponed by two months.

The Bank of America analysts pointed out that speculative net positioning in petroleum futures and options has recently dropped to levels not seen since at least 2011, indicating that investors are preparing for a declining energy price environment.

Additional factors affecting the outlook include weak demand from China, concerns regarding rising trade tensions, and fears of a potential global economic slowdown.

However, despite these bearish signals, the analysts noted that price risks appear “more balanced,” citing expectations for an increase in global energy consumption driven by advancements in artificial intelligence that could enhance productivity.

“The ongoing interaction between artificial intelligence and the fight against climate change centers on energy,” the analysts remarked.