Investors shuffled positions in petroleum modestly last week after heavy selling the week before as war risk diminished and prices settled back towards long-term inflation-adjusted averages.
Hedge funds and other money managers sold the equivalent of just 3 million barrels in the six most important petroleum futures and options contracts over the seven days ending on April 30.
Light sales came after funds sold 95 million barrels the previous week, the fastest rate of selling for more than six months, as the threat of open conflict between Iran and Israel receded.
Fund managers continued to rotate out of NYMEX and ICE WTI and into Brent reflecting rising inventories and signs of persistent over-supply in the United States.
Funds sold the equivalent of 18 million barrels in NYMEX and ICE WTI while buying 25 million in Brent, according to records filed with ICE Futures Europe and the U.S. Commodity Futures Trading Commission.
The result is that fund managers held a net position of 321 million barrels (74th percentile for all weeks since 2013) in Brent but just 139 million barrels (13th percentile) in WTI.
Bullish long positions outnumbered bearish shorts by 5.31:1 (63rd percentile) in Brent but by only 2.16:1 (17th percentile) in WTI.
U.S. crude production has rebounded after the brief disruption caused by the severe winter storm in the middle of January.
U.S. crude stocks remain close to the long-term average and have been trending higher in recent weeks indicating the regional market is comfortably supplied.
On the refined fuels side, fund managers sold both U.S. gasoline (-5 million barrels) and U.S. diesel (-5 million) last week.
Positioning has become very bearish on U.S. diesel and European gas oil and neutral on U.S. gasoline reversing earlier bullishness on both.
Global consumption of diesel and gas oil remains depressed as manufacturers emerge slowly from a shallow downturn in /23.
The threat to global refining capacity has receded after Ukraine stopped attacking Russia’s refineries following pressure from the United States.
U.S. NATURAL GAS
Investment managers made few changes last week to what remained basically a moderately bearish position on U.S. gas prices.
Over the seven days ending on April 30, funds sold the equivalent of 74 billion cubic feet (bcf) in the two main futures and options contracts linked to gas prices at Henry Hub in Louisiana.
The net short position increased slightly to 175 bcf (27th percentile for all weeks since 2010) but was still well above the short position of 1,675 bcf (3rd percentile) 10 weeks earlier.
Gas stocks were 666 bcf (+37% or +1.44 standard deviations) above the prior 10-year seasonal average on April 26, but the surplus has been broadly unchanged for the last six weeks after swelling for most of the winter.
From both a positioning and a fundamental perspective, the balance of price risks is tilted to the upside, with prices until recently stuck near multi-decade lows.
But fund managers remain cautious about becoming too bullish too early after four failed attempts to identify a turning point in prices over the last 12 months.
Source: Reuters (Editing by David Evans)
