Perspective: Oil Prices Capped by Hedge Fund Profit-Taking
By John Kemp, Reuters Market Analyst
LONDON (Reuters) — Hedge funds cut their petroleum positions last week as oil prices neared the top of recent trading ranges and the cyberattack on the Colonial fuel pipeline looked set to cut crude processing and diesel output.
The previous week’s bullishness faded as the market was hit by one of the largest waves of selling since the start of the year, probably a sign of profit-taking rather than a reassessment of the medium-term price outlook.
Hedge funds and other money managers sold the equivalent of 31 million barrels in the six most important futures and options contracts in the week to May 11, after buying 102 million barrels over the previous four weeks.
In the most recent week, portfolio managers sold Brent (-21 million barrels), NYMEX and ICE WTI (-19 million) and U.S. gasoline (-2 million) but bought U.S. diesel (+3 million) and European gasoil (+8 million).
Front-month Brent prices traded around $68 per barrel, similar to the previous peak in March, without making further gains, and above the long-term inflation adjusted average.
Net sales of crude and purchases of products are consistent with a pipeline shutdown likely to force a reduction in refinery crude processing as well as the production and distribution of finished fuels.
The hedge fund community is still very bullish on oil prices, with the combined position across all six contracts amounting to 871 million barrels, putting it in the 80th percentile for all weeks since 2013.
Bullish long positions outnumber bearish shorts by a ratio of 5.38:1, which is in the 73 percentile for all weeks over the same period.
But fund managers have not added a significant number of positions over the last three months since the middle of February, after buying almost 550 million barrels in the previous three and a half months.
Benchmark crude prices have inched up by less than $4 per barrel over the last three months, after rising by almost $30 over the previous period.
For now, the market seems to have settled into a temporary equilibrium around $65, with support from OPEC+ and U.S. shale production restraint offset by the epidemic’s prolonged impact on international jet fuel consumption.
Related News
Related News
- Kinder Morgan Proposes 290-Mile Gas Pipeline Expansion Spanning Three States
- Enbridge Plans 86-Mile Pipeline Expansion, Bringing 850 Workers to Northern B.C.
- Intensity, Rainbow Energy to Build 344-Mile Gas Pipeline Across North Dakota
- U.S. Moves to Block Enterprise Products’ Exports to China Over Security Risk
- Court Ruling Allows MVP’s $500 Million Southgate Pipeline Extension to Proceed
- U.S. Pipeline Expansion to Add 99 Bcf/d, Mostly for LNG Export, Report Finds
- A Systematic Approach To Ensuring Pipeline Integrity
- 275-Mile Texas-to-Oklahoma Gas Pipeline Enters Open Season
- LNG Canada Start-Up Fails to Lift Gas Prices Amid Supply Glut
- TC Energy’s North Baja Pipeline Expansion Brings Mexico Closer to LNG Exports
Comments