Hedge fund oil gross sales gradual as stability of dangers shifts: Kemp

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LONDON — Traders offered petroleum for a fifth consecutive week however the tempo of promoting slowed because the stability of dangers started to shift to the upside and beaten-down costs offered a extra engaging re-entry level.

Hedge funds and different cash managers offered the equal of 15 million barrels within the six most vital petroleum-related futures and choices contracts over the seven days ending on Dec. 13.

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Fund managers offered a complete of 236 million barrels over 5 weeks beginning on Nov. 8, in line with place information revealed by ICE Futures Europe and the U.S. Commodity Futures Buying and selling Fee.

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The mixed place had been diminished to 343 million barrels (eleventh percentile for all weeks since 2013), down from 579 million barrels (forty seventh percentile) 5 weeks earlier.

The bout of lengthy liquidation within the three weeks from Nov. 8 to Nov. 29, when lengthy positions have been slashed by 147 million barrels, has been accomplished, with longs rising by 5 million within the final two weeks.

In the newest week, there have been continued gross sales of Brent (-6 million barrels), U.S. diesel (-7 million) and U.S. gasoline (-5 million) and no change in European gasoline oil.

For the primary time in 5 weeks, nevertheless, there was small shopping for in NYMEX and ICE WTI (+2 million barrels), marking an vital shift in sentiment.

Chartbook: CFTC and ICE commitments of merchants

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From a elementary perspective, the outlook for oil costs stays combined.

Manufacturing cuts by OPEC+, sluggish output development from U.S. shale, and the eventual reopening of China’s economic system are bullish for oil costs.

However the present enterprise cycle slowdown throughout North America and Europe plus disruption from China’s exit wave of coronavirus infections are bearish within the brief time period.

From a positioning perspective, nevertheless, the stability of dangers has clearly tilted in the direction of the upside, particularly in crude oil.

The web place in Brent is simply 89 million barrels (4th percentile for all weeks since 2013) and bullish lengthy positions outnumber bearish shorts by a ratio of simply 1.95:1 (sixth percentile).

With positions already so bearish, there’s appreciable scope for buyers to rebuild bullish lengthy positions if and when the information stream turns into extra constructive or at the very least much less destructive, which might doubtless carry costs within the brief time period.

Associated columns:

– Traders abandon bullish oil positions as recession nears (Reuters, Dec. 12) – Oil costs hunch as receding price-cap menace unmasks worsening demand (Reuters, Dec. 8)

– Traders dumped Brent in anticipation of relaxed oil worth cap (Reuters, Dec. 5)

– Crude oil hit by heavy fund gross sales as fears about cap recede (Reuters, Nov. 29)

John Kemp is a Reuters market analyst. The views expressed are his personal (Reporting by John Kemp in London Enhancing by Matthew Lewis)

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