Goldman Survey: Oil Investors Near Decade-Long Bearish Peak

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AuthorAarav Shah|Published at:
Goldman Survey: Oil Investors Near Decade-Long Bearish Peak
Overview

A Goldman Sachs survey reveals institutional investors are near a decade-high bearish sentiment on crude oil. Over 59% of clients express bearish views, citing a looming global glut driven by increased production and potential easing of geopolitical supply disruptions.

Oil Market Sentiment Sours

Institutional investors are approaching their most bearish stance on oil in nearly a decade, according to a survey by Goldman Sachs Group Inc. Geopolitical tensions and a projected market glut are fueling this pessimism.

Survey Findings

More than 59% of over 1,100 Goldman clients across various asset classes indicated bearish or slightly bearish sentiment on crude oil. This sentiment level is nearing historical lows recorded in the firm's dataset, which dates back to January 2016. The only period of greater negativity occurred last April, coinciding with former President Donald Trump's tariff threats.

Record Short Positions

The survey also highlighted a record number of institutional investors identifying oil as their favored short position. This data was collected between January 5th and 7th by Goldman's Marquee MarketView.

Contributing Factors

Last year, oil experienced its worst performance since 2020. Factors contributing to this included output increases by OPEC+, record production levels from the United States, and expanded supply from nations like Brazil and Guyana. Brent crude, the international benchmark, traded above $61 a barrel on Thursday, significantly down from its year-ago levels despite a slight recovery from recent lows.

Outlook for the Glut

Analysts anticipate the global oil surplus to widen further this year. This forecast does not yet account for a potential resolution to Russia's war in Ukraine, which could remove supply disruptions and sanctions, potentially flooding the market with Russian crude. Additionally, the U.S. aims to manage future sales of Venezuelan oil, intending to bring its crude back to market. Even a modest increase in Venezuela's production capacity could exacerbate the surplus.

Trader Positioning

Trend-following commodity trading advisors are overwhelmingly short on West Texas Intermediate (WTI) crude, the U.S. benchmark. As of Wednesday, these advisors were reportedly 91% short WTI, according to data from Kpler's Bridgeton Research Group.

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