As of August 16 19, the main contract price of WTI crude oil futures hovered at $88.38/barrel, setting an intraday low of $86.82/barrel since the outbreak of the Russian-Ukrainian conflict on February 24.

"No one would have thought that WTI crude oil futures would have such a big face change." A Wall Street multi-strategy hedge fund manager told reporters with emotion. Up to now, many hedge funds still believe that the Russian-Ukrainian conflict has led to tight supply and demand in the global crude oil market, especially the European natural gas prices have hit record highs, making the critical point of global energy supply and demand balance far from coming. But it is an indisputable fact that crude oil futures have fallen by more than 32% in the past two months.

A crude oil merchant told reporters bluntly that WTI crude oil futures fell by about $30/barrel in just two months. In addition to the increased risk of global economic recession, there are two factors that cannot be ignored. First, the continuous sharp interest rate hike by the Federal Reserve has led to record highs in the US dollar index, which has led to a sharp correction in the prices of commodities denominated in US dollars; Second, the fluctuation of crude oil price will inevitably aggravate the net value fluctuation of hedge fund portfolio, which will lead to the reduction of crude oil in future positions to avoid risks.

"At present, many hedge fund managers regard the sharp drop in crude oil as the product of the US government's strong dollar policy, because a strong dollar helps reduce US fuel prices and inflationary pressures." He told reporters frankly.

It is worth noting that during the plunge of crude oil futures prices, investment banks "changed their faces" faster. Recently, Goldman Sachs released the latest report, which lowered the forecast value of Brent crude oil futures price in the third quarter of this year to 1 10 USD/barrel, while the previous forecast value was 140 USD/barrel.

Recently, Citibank also released the latest report that Brent crude oil futures price will drop to 80-85 USD/barrel in the next few weeks, which is still about 10 USD lower than the current 94 USD/barrel.

This also triggered a sudden wave of short selling of crude oil futures in the financial market.

According to the latest report released by the Commodity Futures Trading Commission (CFTC), as of the week of August 9, the net long position of WTI crude oil futures options held by asset management institutions dominated by hedge funds decreased by 25.654 million barrels compared with the previous week. Behind this, more and more hedge funds realize that western countries are doing their best to curb the rising energy prices and inflationary pressures. It is more profitable to short crude oil prices at this time.

However, many investment banks are quietly bargaining for crude oil futures while "singing empty" oil prices. According to CFTC data, as of August 9th, swap dealers, mainly investment banks, increased the net long position of WTI crude oil futures options by 1 19 10000 barrels.

"This makes the long-short game in the crude oil futures market more dramatic," said the above-mentioned crude oil commission merchant. Behind this, perhaps investment banks have realized that the Fed's interest rate hike in the future is not as strong as that in June-July, and instead bet on the rise and fall of the US dollar and the recovery of oil prices. After all, many investment institutions believe that the current decline in oil prices has long deviated from the fundamentals of supply and demand.

The driving force behind the high diving "no one would have guessed in mid-June, and the WTI crude oil futures price was only $86/barrel two months later." The above-mentioned Wall Street multi-strategy hedge fund manager bluntly told reporters. At that time, in view of western countries' restrictions on Russian crude oil exports, most Wall Street hedge funds bet that WTI crude oil futures would rise from 123 USD/barrel to 160-200 USD/barrel.

In his view, the primary behind-the-scenes driving force to change the rise in oil prices is not the increase in the risk of global economic recession, but the strong dollar created by the Fed's continued sharp interest rate hike.

After the Federal Reserve raised interest rates by 75 basis points in June, which made the US dollar index hit a new high, a large number of quantitative investment funds began to sell crude oil and other commodities, which suddenly triggered a series of domino effects.

Specifically, many hedge funds hope that the rise in oil prices can hedge the pressure of portfolio losses when the Fed's expectation of a sharp interest rate hike heats up and leads to a sharp drop in US stocks. However, as the quantitative investment funds sold a lot of dollars, which led to the drop in oil prices, they suddenly found that the volatility of the net value of their portfolios further increased, forcing them to hedge with the crude oil futures.

"Since then, hedge funds and family offices have no longer regarded crude oil as a safe-haven asset, but as a high-risk asset, and they can't wait to clear their positions quickly." The above-mentioned crude oil commission told reporters. Since late June, CFTC report shows that hedge funds have been greatly reducing the net long position of crude oil futures.

In his view, since July, Wall Street has suddenly speculated that the Federal Reserve will raise interest rates substantially, which has caused the risk of recession in the United States to surge, further depressing the confidence of those who support crude oil. With the growing concern about the economic recession in the United States, long-term investors such as macroeconomic hedge funds, which originally supported oil prices in view of the gap between supply and demand of crude oil, have also begun to reduce their holdings of crude oil futures.

The reporter learned from many sources that many hedge funds regard the sharp drop in oil prices as "the victory of the US government's measures to strengthen the dollar" because it helps to reduce the US fuel price and inflationary pressure.

But at the same time, they still believe that the tight supply and demand in the crude oil market makes the oil price undervalued. At present, an important reason why they dare not bargain for crude oil futures on a large scale is that the sharp interest rate hike by the Federal Reserve has led financial institutions to tighten the threshold of leveraged financing accordingly, so that they can not only buy WTI crude oil futures with 6-8 times of capital leverage as before, but also have to continue to reduce the size of long crude oil positions to reduce the number of leveraged investments.

"In addition, most hedge funds also realize that as western countries do their best to curb inflation and energy prices, even if they beat the market (the bottom is successful), they may not be able to beat the government." The crude oil broker pointed out.

Behind the face-changing of investment banks, in the face of high oil prices diving, the speed of "face-changing" of investment banks is also not low.

Recently, Goldman Sachs released the latest report, which lowered the forecast value of Brent crude oil futures price in the third quarter of this year to 1 10 USD/barrel, while the previous forecast value was 140 USD/barrel.

At the beginning of July, JPMorgan Chase analysts warned that the global oil price could reach $380 a barrel if sanctions from western countries prompted Russia to retaliate against crude oil production cuts.

Today, it seems that JPMorgan Chase has not released the latest forecast of crude oil price trend.

It is worth noting that investment banks "sing empty" oil prices, but at the same time they are bargain-hunting oil prices on a large scale.

According to CFTC data, as of August 9th, swap dealers, mainly investment banks, increased the net long position of WTI crude oil futures options by 1 19 10000 barrels.

A domestic brokerage analyst told reporters that investment banks may be "passively" increasing the net long position of crude oil futures. The reason is that investment banks, as market makers of crude oil futures, need to revitalize the liquidity of market transactions. Last week, when hedge funds sold crude oil long positions in a big way and no one was willing to take over, it was not ruled out that the proprietary department of investment banks could only buy crude oil futures long positions to "match" the transaction, so as to maintain the necessary trading liquidity in the crude oil futures market.

However, most wall street hedge fund managers believe that the investment bank's move shows that they are more daring to bet on the bottom rebound of oil prices, given the huge gap between supply and demand in the crude oil market.

According to the latest report released by Goldman Sachs, the current crude oil supply is still disappointing. Although the demand side is still high due to the impact of the European natural gas crisis, the demand for crude oil is stronger than market expectations. In addition, even if the global economy continues to slow down, the price of Brent crude oil may still reach 150 USD/barrel in the fourth quarter of this year and in 2023, thus realizing the balance between supply and demand of crude oil by reducing demand.

"In fact, the last thing that investment banks want to see is the continuous decline in oil prices. On the one hand, this leads to their huge investment in crude oil exploitation, and it takes longer to recover the principal and interest; On the other hand, low oil prices will also affect their business income in the crude oil futures market. " A hedge fund trader familiar with the investment bank's crude oil commodity business told reporters.

However, although investment banks such as Goldman Sachs are supporting oil prices with practical actions, there are still few respondents.

"Nowadays, many institutional investors realize that even if the oil price is undervalued, in the current situation that curbing inflation has become the primary economic task of western countries, rashly pushing up the oil price will face unknown risks." The hedge fund trader pointed out. Especially after the strong dollar made their previous arbitrage strategy of buying up oil prices fail, most institutional investors are now extremely cautious and unwilling to step into the same river easily.

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