Column: Oil hedge funds caught between sanctions and recession

A general view of oil tanks at the Turkish Mediterranean port of Ceyhan, which is managed by the Petroleum Pipeline Corporation (BOTAS), about 70 km (43.5 miles) from Adana, Turkey February 19, 2014. REUTERS/Umit Bektas/File Photo

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LONDON, May 16 (Reuters) – Portfolio investors have left their oil positions virtually unchanged for the past nine weeks as Russia’s loss of production has been accompanied by a loss of consumption from China and Europe. .

Hedge funds and other money managers held a net position in the six major oil-related futures and options of 548 million barrels on May 10 from 553 million on March 15.

Over the past nine weeks, the net position has averaged 552 million barrels, ranging from just 30 million barrels from a low of 539 million to a high of 569 million.

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The absence of significant changes over such a long period is unusual and implies that fund managers have few strong convictions about the direction of crude or fuel prices.

The most recent week saw small sales of NYMEX and ICE WTI (-4 million barrels), Brent (-2 million), US gasoline (-5 million) and European diesel (-2 million). ) but purchases of American diesel (+3 million). million).

Overall, bullish long positions outnumber bearish short positions by a ratio of almost 5:1 (64th percentile since 2013) but the net position is only 548 million barrels (38th percentile), which confirms the lack of conviction.

On the upside, global oil inventories are low, OPEC+ and US shale producers continue to limit production increases, and sanctions threaten to disrupt Russian oil production and exports.

On the downside, however, crude and fuel prices are already high in real terms, consumption in China has been reduced by coronavirus lockdowns, and all major economies are showing signs of slowing economic growth.

The number of open futures positions held by all categories of traders fell another 48 million barrels last week, and is down from a total of 1,169 million barrels since mid-February to the lowest since June. 2015.

Associated columns:

– Hedge funds adjust to new oil normal (Reuters, May 9) read more

– US distillate stocks fall to critical level (Reuters, May 5) read more

– Global manufacturers lose momentum as inflation worsens (Reuters, May 3) read more

– Oil prices paralyzed between Russia sanctions and China lockdowns (Reuters, April 25) read more

John Kemp is a market analyst at Reuters. Opinions expressed are his own.

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Editing by Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.

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