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Hedge funds rebuild oil position after OPEC? big salami: Kemp

Portfolio investors have restore their position in crude oil after peace of mind from Saudi Arabia and its OPEC? allies that any scheduled future boosts in production would be contingent on market conditions.

Last week hedge funds and other cash managers turned their attention to improving Brent positions, after a large jump in NYMEX and ICE WTI the week in the past, according to records filed with exchanges and regulators.

Fund managers acquired the equivalent of 69 million barrels of futures and choices linked to Brent over the 7 days ending on June 18, the fourth fastest increase for any week given that 2013.

Rapid Brent buying came after fund managers acquired 42 million barrels of NYMEX and ICE WTI, along with 26 million barrels of Brent, the previous week.

Chartbook: Oil and gas positions

As a result, positions and costs have actually reverted to where they were before OPEC? announced on June 2 it would increase production from the start of the fourth quarter of 2024, subject to market conditions.

Overall Brent and WTI positions amounted to 300 million barrels on June 18 up from an immediate post-announcement low of 164 million on June 4 but hardly changed from 319 million on May 28.

Fund supervisors are downhearted about the outlook for costs in the short-term, with the net position in just the 13th percentile for all weeks given that 2013.

However expectations OPEC? was about to flood the market with extra barrels have actually been eased after main briefings emphasising the contingent nature of the scheduled production increases.

Futures rates have likewise gone back to the same level as before the production boosts were revealed, with the front-month agreement closing at $85 per barrel on June 18 compared with $84 on May 28.

The big salami in positions and costs set off by the OPEC? surprise announcement appeared to have been finished by the middle of last week.

EUROPE GAS OIL

Fund supervisors likewise bought the equivalent of 28 million barrels of futures and choices connected to European gas oil over the 7 days ending on June 18, a record for the last decade.

The net position doubled to 60 million barrels (67th. percentile) from 31 million barrels (36th percentile) the week. in the past.

The unexpected bullishness likely discusses why product trader. Trafigura has packed gas oil in the Persian Gulf onto an extremely. big crude carrier (VLCC) to carry it west to Europe.

The delivery marks the very first VLCC to move diesel wholesale. from the Middle East to the West in nearly a year, data from. Kpler program ( Trafigura charters supertanker to load gasoil from. Mideast, , June 24).

U.S. GAS

Portfolio supervisors continued to increase their bullish. position in U.S. gas however at a slower rate than in current weeks. as stocks showed stubbornly high and the cost rally ran. out of momentum.

Hedge funds and other cash managers acquired the. equivalent of 47 billion cubic feet (bcf) in the 2 main. futures and choices contracts connected to the price of gas at. Henry Hub in Louisiana.

Funds have increased their position in 14 of the most recent. 17 weeks by a total of 2,845 bcf since February 20, but last. week's increase was one of the smaller sized increments.

The resulting net long position of 1,170 bcf (58th. percentile for all weeks since 2010) on June 18 was up from a. net except 1,675 bcf in the middle of February (3rd. percentile).

Working gas stocks were 592 bcf above the previous. ten-year seasonal average on June 14 below a surplus of 664. bcf on March 15.

In portion terms, inventories were 24% above the ten-year. seasonal average below a surplus of 40% some 13 weeks. earlier.

But stocks were still 1.47 standard discrepancies higher than. average and on that step the surplus had not narrowed at all.

Constantly high stocks have actually started to test investors'. faith in a fast reversion to normal after significant gas producers. announced cuts to drilling programmes in February.

Related columns:

- Oil funds temper bearishness after OPEC? reassurance( June. 17, 2024)

- OPEC? surprise set off record hedge fund oil sales (June. 10, 2024)

- OPEC? switches method to safeguard market share( June 4,. 2024)

John Kemp is a market expert. The views revealed. are his own. Follow his commentary on X https://twitter.com/JKempEnergy.

(source: Reuters)