Bargain-hunting hedge funds boost oil positions: Kemp
By John Kemp
LONDON, July 25 (Reuters) - Portfolio investors purchased oil futures and options for the second week running as at least some fund managers concluded that expectations of a recession and a recent sell-off were overdone.
Hedge funds and other money managers purchased the equivalent of 31 million barrels in the six most important petroleum futures and options contracts in the week ending on July 19 (Link).
Buying was heavily weighted towards the initiation of new bullish long positions (+26 million barrels) rather than liquidation of existing bearish shorts (-5 million).
It was focused on crude rather than products with purchases of both Brent (+15 million barrels) and NYMEX and ICE WTI (+15 million).
There were only minor adjustments in U.S. gasoline (+2 million barrels), U.S. diesel (+1 million) and European gas oil (-3 million).
Even after the buying, the net position across all six contracts is relatively low at just 485 million barrels (28th percentile for all weeks since 2013). Crude positions are especially low at just 381 million barrels (21st percentile).
Relatively bearish positioning, combined with the retreat in prices that set in after the middle of June, has improved the risk-reward ratio and encouraged at least some investors to re-enter the market to profit from any rebound.
- Oil positions steady after heavy hedge fund selling ends (Reuters, July 18)
- Oil dumped by hedge funds on heightened recession risk (Reuters, July 11)
- Oil bulls retreat as economic outlook darkens (Reuters, July 4)
- Funds sell oil at fastest rate for 15 weeks as economic outlook worsens (Reuters, June 27)
John Kemp is a Reuters market analyst. The views expressed are his own
Editing by Barbara Lewis
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