Column: Oil prices soar with little help from hedge funds: Kemp


Oil storage containers are seen, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, United States, April 7, 2021. REUTERS / Lucy Nicholson

LONDON, Sept. 27 (Reuters) – The prolonged disruption of oil production in the Gulf of Mexico and mounting signs of a global energy shortage have not been enough to encourage major new oil purchases from portfolio investors.

Hedge funds and other fund managers bought the equivalent of just 12 million barrels in the six largest oil futures and options contracts in the week to September 21, according to stock market data and regulatory.

The funds have purchased a total of 129 million barrels over the past four weeks, offsetting about half of the 268 million barrels they have sold in the previous ten weeks amid concerns over a growing number of coronavirus cases .

But the most recent week’s buys were the lowest so far, suggesting that the previous bullish momentum was fading, just before prices hit their highest level in nearly three years (https: // tmsnrt.rs/2WiPTxy).

The most recent week, the funds were buyers of Brent (+21 million barrels) and US fuel oil (+8 million) but small sellers of NYMEX and ICE WTI (-11 million), US gasoline (-1 million ) and European gas. oil (-5 million).

The combined position on the six contracts fell to 806 million barrels (73rd percentile for all weeks since 2013) from a recent low of 677 million (59th percentile) on August 24.

The ratio of bullish long positions to bearish shorts climbed to 5.85: 1 (79th percentile) from 4.25: 1 (57th percentile) at the end of August, implying that the hedge fund community is broadly optimistic about to the outlook for oil prices.

In real terms, first-month Brent futures prices are at their highest level since October 2018 and well above their long-term average, in the 71st percentile for all months since 1990.

However, positions are not particularly strained at this stage; there is room for more buying and only moderate risk of a sharp reversal in the price trend based on positioning alone.

Associated columns:

– The global energy shortage manifests itself in soaring prices for coal, gas and oil (Reuters, September 24) read more

– Funds rebuild their bullish position on oil after hurricane outage (Reuters, September 20) read more

– Fund managers focus on middle distillates (Reuters, September 13) read more

– Oil attracts big fund purchases as prices rebound (Reuters, September 6)

Editing by David Evans

Our Standards: The Thomson Reuters Trust Principles.

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